Answered: The overall approach under PAS 21 is…

The overall approach under PAS 21 is for an entity to translate foreign currency items and transactions into its functional currency.

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter8: Investing Activities

Section: Chapter Questions

Problem 14QE

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Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.

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Please answer it if is TRUE or FALSE.

The overall approach under PAS 21 is for an entity to translate foreign currency items and
transactions into its functional currency.

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Describe the functional currency concept and briefly describe how a foreign entity’s functional currency Is determined.
Explain the rule for translating the Financial Statements of Foreign Operations from Local Currency to Functional Currency.
In SFAS No. 52 (see FASB ASC 830), the FASB adopted standards for financial reporting of foreign currency exchanges. This release adopts the functional currency approach to foreign currency translation. Required: A. Discuss the functional currency approach to foreign currency translation. B. Discuss the terms translation and remeasurement as they relate to foreign currency translation.
Explain the rule for translating the Financial Statements of Foreign Operations from Local Currency to Functional Currency. Explain the rule for translating the Financial Statements of Foreign Operations from Functional Currency to Presentation Currency
In presenting foreign currency denominated transactions to the functional currency of the entity, which of the following statements is correct? a. When nonmonetary items are translated from foreign currency to functional currency in the financial statements, foreign currency gain of loss will be recognized. b. Monetary items shall be initially recognized and measured at the exchange rate prevailing at the end of the reporting period. c. Foreign currency gain or loss arising from translation of the foreign currency denominated items to functional currency shall be presented in other comprehensive income with reclassification adjustment to profit or loss if realized. d. Foreign currency denominated income statement accounts shall be translated using the exchange rate at the date of transaction.
Explain the concepts of Local Currency, Functional Currency and Presentation Currency with suitable examples Explain the rule for translating the Financial Statements of Foreign Operations from Local Currency to Functional Currency
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What concept underlies the two-transaction perspective in accounting for foreign currency transactions?
MCQs An entity's functional currency is the currency of the primary economic environment in which the entity operates the currency on which the financial statements have been prepared the currency in the domicile country of the entity all of these According to PAS 21, a reporting entity shall have only one functional currency shall have only one presentation currency may present its financial statements using any presentation currency it wishes a and c The following are ways of conducting foreign activities Engaging in foreign currency-denominated transactions having foreign operations sending personnel abroad for training and conferences a and b According to PAS 21, a reporting entity is required to identify its functional currency encouraged to identify its fuctional currency required to identify its presentation currency a and c
describe foreign currency transaction exposure, including accounting for and disclosuresabout foreign currency transaction gains and losses
Discuss the four main methods and the applicable currency rates that are available to multinational companies for the translation of foreign subsidiary financial statements.
Choose the correct. In accounting for foreign currency transactions, which of the following approaches is used in the United States?a. One-transaction perspective; accrue foreign exchange gains and losses.b. One-transaction perspective; defer foreign exchange gains and losses.c. Two-transaction perspective; defer foreign exchange gains and losses.d. Two-transaction perspective; accrue foreign exchange gains and losses.