Currency Translation Question different, average, because

stockjaguar

Schweser Mock AM Q18.

Suppose the parent uses the all-current method to translate the subsidiary for fiscal 2008. Will ROA and NPM in U.S Dollars before translation be the same as, or different than, the translated Canadian dollars?

ROA NPM
Same Same
DIff Diff
Diff Same

I put B because I thought NI would be different under the temporal as the F/X G/L hits the income statement. The answers say that NI should be the same as both methods translate at average which is fine but why is the FX G/L not accounted for here?



Edited 1 time(s). Last edit at Tuesday, June 1, 2010 at 02:45AM by mambovipi.

benbenxiong

Gains for All-Current method show up on the balance sheet not IS

onelife1

justinkc Wrote:
-------------------------------------------------------
> Gains for All-Current method show up on the
> balance sheet not IS

Equity->OCI->CTA right?

huangxiaoxie

OOHHH sorry missread the question. I thought they were asking the diff between temperol and current but they were just asking the diff between before and after translation using all current. Thanks anyway



Edited 1 time(s). Last edit at Tuesday, June 1, 2010 at 03:20AM by mambovipi.

profil

CFAtime Wrote:
-------------------------------------------------------
> So the answer is C right?
>
> ROA = NI / Assets
>
> NI - translated at average under AC method
> Assets - translated at current under AC method
>
> means ROA will be different.
>
> NPM = NI / Sales
>
> NI - translated at average
> Sales - translated at average
>
> means no change.
>
> Correct?

Correct.

OmarAdnan

Would it be possible to answer this question if it said temporal instead of all current?

Because then NI, sales and assets are all translated using mixed rates. Then you'd actually have to calculate the ratios to see if they changed.

Is that correct?

yospaghetti

CFAtime Wrote:
-------------------------------------------------------
> Would it be possible to answer this question if it
> said temporal instead of all current?
>
> Because then NI, sales and assets are all
> translated using mixed rates. Then you'd actually
> have to calculate the ratios to see if they
> changed.
>
> Is that correct?

Yea kinda depends on the question. If you were told to calculate COGS using avg rates, then NI/Sales would be the same.

But otherwise yes I would calculate all the numbers.

MiniMe7

CFA.Rhythm Wrote:
-------------------------------------------------------
> what's the answer?


Answer is C

Diff ROA, Same NPM