I guess i was wrong..

torontoanalyst

In Schweser it says equity is translated with the current rate under CURRENT RATE method.


but I was doing a problem from CFAI and it says equity is translated with historical rate. i was like wtf...

and in the FAS book on page 177, it says equity is translated with the historical rate. C

I am so confused.

defour44

help someone? =(

DSquaredSlim

thanks BPDULOG!

genuinecfa

Multiple things happening here. Please follow along slowly. Very similar to what bpdulog has written above.

1. Current Rate Method
2. All A and L are translated at Current Rate
3. Equity as a whole which is (A-L) would also be translated at the Current Rate.
4. Common Stock, which is a part of equity, is by itself translated at the Historic Rate.

5. So a component of Equity (as a whole translated at Current Rate) is translated at Historic Rate.
6. An additional Component of Equity - the Retained earnings (assuming first year of operation) would be fully Net Income - translated at the Average rate.

How do 4, 5 and 6 tie together? By including the CTA (which could be a gain or a loss) in the Equity.

Does that make sense?

CP

SpyAli

common stock - historical
equity = A - L - current rate all of them

Pegasus2008

Yea makes perfect sense, you guys are too nice!