If functional currency is the same as parent's presentation currency, the temporal method is used to remeasure the foreign currency financial statements.
My question: if both currencies are same, what is the need to translate anything? Why can't you just do a full consolidation?
Thanks, pls answer very critical to my understanding.作者: flyinggirl 时间: 2011-7-13 15:53
i didn't get this at first either.
i believe it's b/c transactions are still taking place in a local currency (wherever the subsidiary is located) no matter what.
so if the parent co is a company in US and presentation currency is USD and they have a subsidiary in Europe then the local currency is EUR.
if the functional currency of the sub is USD, then the functional and presentation match, so the Euros are translated at the temporal rate
if the functional currency is not the presentation currency of the parent (ie sub's functional matches local, EUR), then use current method.作者: MiniMe7 时间: 2011-7-13 15:53
Just see the question, of course we can't translate anything if it's the same currency.作者: yalo 时间: 2011-7-13 15:53
Maybe this is a little clearer. Just because a company might do business with the US and its functional currency is in $, it will file its financials in Euro's. So when the parent consolidates financial statements it has to adjust them for exchange rates. Hope that helps.作者: jacksparrow 时间: 2011-7-13 15:53
they have to report their financial statement in the local currency to the local government.
So temporal method is an easy way to translate.作者: ap0258 时间: 2011-7-13 15:53
i guess this gives me the following rules
if presentation = functional = local (do consolidation)
if (presentation = functional) != local (do temporal)
if presentation ! = (functional = local) (do current)
