SUMMARY OF CURRENCY TRANSLATION AND THE BEHAVIOR OF EXCHANGE RATE Journal written by Robert G.Rulland from Northeastern University and Timothy S.Dauprik from Univesity of South Carolina discussed about the foreign currency translation and behaviour of exchange rate. Consequently, the first controversy is which translation method provides the most meaningful translation gains and losses, for example which method provides the most reasonable measure of the foreign entity's exposure to movements in exchange rates. The second controversy is whether translation gains and losses should be reported in the income statement or whether they should be deferred and shown in the stockholders' equity section of the balance sheet. Two major controversies exist in the translation of foreign currency financial statements is first which translation method should be used, and the second is how should the resulting translation gains and losses be reported. When items translated at current exchange rates, translation gains and losses result. Translation methods vary as, to which balance sheet items translated at current and which at historical exchange rates. This paper proposes two criteria for settling these questions which are based upon the actual pattern of exchange rates existing between the U.S. dollar and other currencies .It is argued that application of these criteria would result in a more objective and economically meaningful translation process than exists under current rules.
Exchange rate gains or losses are brought to account in determining the net profit or loss in the period in which they arise, as are exchange gains or losses relating to cross currency swap transactions on monetary items. Exchange differences relating to hedges of specific transactions in respect of the cost of inventories or other assets, to the extent that they occur before the date of receipt, are deferred and included in the measurement of the transaction. Exchange differences relating to other hedge transactions are brought to account in determining the net profit or loss in the period in which they arise. Foreign controlled entities are considered self-sustaining. Assets and liabilities are translated by applying the rate ruling at balance date and revenue and expense items are translated at the average rate calculated for the period. Exchange rate differences are taken to the foreign currency translation reserve.
During the second half of 1997, currencies and stock market prices plunged in value across Southeast Asia, beginning in
For a floating exchange rate, the total balance of payments is always zero. Saying that the current account is in balance then also implies financial account balance.
Apple Inc. is a multinational company in the technology industry with its operations being actualized in designing, developing and sell of electronics, computer software, and online services to its consumers in the US and around the universe (Berman, 2012). Apple Inc. has experienced a pinch due to the fluctuating exchange rates. One of the features on the earnings reported by Apple that is not well articulated is the impact of changes arising from foreign currency values. The company uses the dollar to report its financial reports hence it prone to exchange rate fluctuations because of trading around the globe (Chatterjee, 2013). The US dollar has appreciated significantly against the other major currencies making Apple earnings subject to exchange rate fluctuations (Berman, 2012). Around 64% of sales on Apple Inc. products occur outside the US and the company also keeps $137 billion of its $155 billion cash reserve outside the US hence making these unhedged balances vulnerable to changes in the underlying currency.
Items presented in the financial statements of each of the Group`s entities are measured using the functional currency. IPL’s presentation currency is the Australian dollar, the currency used to present its consolidated financial statements. Foreign currency transactions are translated into the functional currency at the exchange rate on the day the transaction occurs. Foreign exchange gains and losses are recognised in the statement of comprehensive income, except when they are `deferred in equity as qualifying cash flow hedges`. These have been calculated following the AASB 121 `The effects of changes in Foreign exchange rates` and AASB 139 `Financial instruments – recognition and measurement`.
1. Assume that the U.S. inflation rate becomes high relative to Canadian inflation. Other things being equal, how should this
In the first three months, the RMB currency were in a smooth change around close to USD$1. However, from the latter of three months, the currency of USD rapidly decreases in a recession rate. Which is reached the lowest point at 6.47431 RMB Yuan against to USD $1 on 6th June 2011.
Finance plays and important role in our day-to-day routine. Considering the value of money, countries and people have started investing them into other countries and shares. Investing money in other countries is principally dependent on currency exchange rates.
i) The exchange rate is the rate at which one can exchange the currency of one country for the currency of another country. It can also be regarded as the value of one country’s currency in relation to another currency. Basically, it is the price of a nation’s currency in terms of another currency. Therefore, the exchange rate has two components, the domestic currency and foreign currency, and it can be quoted directly or directly. In a direct quotation, the foreign currency is the base currency and the domestic currency is the counter currency. While in an indirect quotation, the domestic currency is the base currency and the domestic currency is the counter
The objective of this paper is to investigate the exchange rate volatility and its effects on international Trade in Bangladesh during May 2003-Dec 2008. The concept of the study is taken from one off the working papers of Bangladesh Bureau of Statistics (BBS), Bangladesh Bank, Centre for Policy Dialogue (CPD) and leading English and Bengali Dailies in Bangladesh.
“Fluctuations in foreign currency exchange rates could have a material adverse effect on our financial results.” Since the company is worldwide, “the company earn revenue, pay expenses and incurred liabilities” (Item 1A pag 13) using foreign currencies. This factor can be affected because the presentation of the financial statements are presented in U.S. dollars and the exchange rates can increase or decrease the value of the U.S. dollar. And consequently, affect “net operating revenues, operating income and the value of balance sheet” (Item 1A pag 13).
North America, Europe, and Asia carry out the majority of the buying and selling of foreign
There were variations in accounting values for international credit markets equity accounts that resulted from variations in exchange rates used in translating carrying values and income streams in foreign currencies to U.S dollars. Translation risks must have been occasioned by exposure to fluctuations in exchange rates in circumstances when foreign currencies were used. The risk depends on whether the financing institution creates an open position. The size of maturity gap and settlement uncertainties also determines the level of risk (Comptroller of the Currency Administrator of National Banks, 1998).
INTERNAL RESEARCH ASSIGNMENT Name of the candidate: Anjali Goyal Enrollment no.: 00915903915 Course: MBA (1st Shift) Batch: 2015 - 2017 Semester: 3rd Semester Subject Name: International Financial Management Subject code: MS - 217 Topic of assignment: Floating and Fixed Exchange Rate Subject Teacher’s name: Mr. Mikhilesh Yadav Date of submission: October 19, 2016 Assignment Submission Form (For office use only) Enrollment No.: