translation gain and loss currency, current, anything, example

Kapie

does translation gain or loss have anything to do with currency appreciation/deppreciation?

for example, if under current method, a gain happen and the local currency is depreciation, is it a translation loss?

if under temporal method, a loss happen and local currency is deppreciating, is it a translation gain? Thanks.

KungFuPanda

wow! i never saw it like that???

ap0258

It depends on your exposure:

1. Under the current method, your exposure is your equity (A-L) which is usually positive.
2. Under the temporal method, your exposure is your monetary assets minus your monetary liabilities.

A net asset exposure in both situations combined with an appreciating currency leads to a gain.

NO EXCUSES

scarecrow

are you taking the cfa exam hw0799?

Uranus08

Does mean-varaiance analysis have anything to do with the Portfolio Management section?

chandsingh

does depreciation have anything to do with buying an asset?

Houjichasan

Wow, 30 seconds of my life I will never have back......I know, I know, that's what she said.

b_sea93

1. temporal ( currency risk exposure is only for monetary assets and liabilities)
if you have a net monetary asset position in the foregn currency a depreciating foregn currency will result in a loss

for net monetary liability you want the foreign currency to depreciate because you will post a gain in translation.

results in translation gain or loss in the income statement

2. current rate ( all assets and liabilities are exposed )

A- L= Equity
usually positive
so it should usually be a gain when currency appreciates and a loss when it depreciates

results in cumulative translation adjustment in OCI