- CFA Exams
- CFA Level I Exam
- Study Session 5. Financial Reporting and Analysis (1)
- Reading 15. Multinational Operations
- Subject 5. Remeasurement versus Translation
CFA Practice Question
Assume that on April 1 a non-US based subsidiary buys marketable securities and inventories on its balance sheet valued in the local currency (LC) at 100,000 LC each that are both remaining as of December 31. The relevant exchange rates are as follows:
April 1: $0.16=1LC
December 31: $0.19=1 LC
January 1: $0.15=1LC
April 1: $0.16=1LC
December 31: $0.19=1 LC
Assume the $US is the subsidiary's functional currency. On a consolidated balance sheet as of December 31, what balances are reported?
A. Securities = $19,000 and Inventory = $16,000.
B. Securities = $15,000 and Inventory = $15,000.
C. Securities = $19,000 and Inventory = $15,000.
Explanation: If the $US is the functional currency, the temporal method must be used. Under the temporal method, monetary assets (securities) are remeasured at current exchange rates and nonmonetary assets (inventory) are remeasured at historical exchange rates.
User Contributed Comments 2
User | Comment |
---|---|
turtle | inventories were bought on 1st April for the equivqlent of 16.000 USD. |
mazen1967 | The marketable securties is a monetary assets, and cash and AR are also monetary assets |