Schweser Exam 1 AM Translation Vignette note, conflict, average, current

sgupta0827

I’ve dissected this vignette but have a few outstanding Q:
1. Inventory: Although the translated amount is given, I see that they used the average rate of 1.35 to obtain it. Since the firm uses FIFO, shouldn’t you use the most current rate of 1.32? Or does the “purchased inventory evenly throughout the year” note (which implies average rate) basically “overrule” the FIFO note (which implies current rate)? Basically I’m observing the conflict in text here.
2. Accounts Payable: I know that A/P is a monetary asset so you should use the current rte of 1.32, but they provide additional text that says “The accounts payable on the fiscal 2008 balance sheet were all incurred on June 30, 2008.” The June 2008 rate is 1.37. So apparently you just ignore this note. What gives it away that this note should be ignored?
3. COGS: It is given as 1,667,250 which implies a rate of around 1.38, which is not provided. However, if this translated amount were not given as a note, what rate would you use? Is it historic rate since FIFO is used? Or is it average rate since inventory was bought and sold evenly throughout the year?
I KNOW this will be on the exam because it is a huge topic and there was not a single translation Q on last year’s exam. Thanks!

anothercfainnyc

1. So if you see FIFO or LIFO but also see that inventory was purchased evenly throughout the year, you always choose the average rate for inventory translation?
2. I guess A/P should always be current rate no matter what tricky text they use?
3. Same as #1–I assume COGS should always be translated at the same rate as Inventory (just like PP&E and depreciation should be at the same rate)?

hw0799

1. You need to value inventory at historical cost. Since the inventory was purchased evenly throughout the year, and based on FIFO, you MIGHT have inventory left from July-December (just a thought). So using the average rate would give a better picture than the current rate. That is how I think about it.
2. The ability to convert into cash will want me to use the current rate.
3. I would use the average one, following the same methodology in answer 1.