International Accounting - Essay Example

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International Accounting

The objectives of this standard are to give a framework on how to incorporate foreign currency transactions and foreign operations or subsidiaries in the financial statement of the parent company. It also shows how to translate financial statement into presentation currency. The most critical thing in this concept is to determine which exchange rate or rates to use and how to account for the exchange difference in the financial statement. The standard requires the entire initial foreign transaction to be recorded on the bases of the prevailing exchange rate, however, it recognizes the use of average exchange rate to numerous transactions occurring during the year (Doupnik & Perera, 2011). The basis for translation can either be current method or temporal method. Temporal method uses the exchange rate that prevailed when the asset and liabilities were acquired. If the assets are based on historical cost the correct exchange rate to use is also historical. Consequently if liabilities and assets are based on current cost the rate to use is also the current one. ...Show more

Summary

Topic: International Accounting Class: Date: a.) b) Balance Sheet As At 31 December2010     exchange rate     €   ? Non-current asset       Equipment at cost 700000 1.4 980000 less depreciation 70000 1.4 98000   630000   882000 inventory 21000 1.1 23100 net monetary asset 40000 1.2 48000 loan 200000 1.4 280000   680000   673100 retained profit 60000   97000 share capital 600000 1.4 840000 foreign exchange gain     -263900   680000   673100 Income Statement For The Year Ended 31 December 2010   € exchange rate ?…
Author : cwiza
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