Chap14Management-of-Translation-Exposure国际财务管理英文版.ppt
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- Chap14Management of Translation Exposure 国际 财务管理 英文
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1、Chap14Management-of-Translation-Exposure国际财务管理英文版Chapter OutlinelTranslation MethodslFASB Statement 8lFASB Statement 52lManagement of Translation ExposurelEmpirical Analysis of the Change from FASB 8 to FASB 52Translation MethodslCurrent/Noncurrent MethodlMonetary/Nonmonetary MethodlTemporal Methodl
2、Current Rate MethodCurrent/Noncurrent MethodlThe underlying principal is that assets and liabilities should be translated based on their maturity.nCurrent assets translated at the spot rate.nNoncurrent assets translated at the historical rate in effect when the item was first recorded on the books.l
3、This method of foreign currency translation was generally accepted in the United States from the 1930s until 1975,at which time FASB 8 became effective.Current/Noncurrent MethodnCurrent assets translated at the spot rate.e.g.DM2=$1nNoncurrent assets translated at the historical rate in effect when t
4、he item was first recorded on the books.e.g.DM3=$1Balance SheetLocal CurrencyCurrent/Noncurrent Cash2,100 DM$1,050 Inventory1,500 DM$750 Net fixed assets3,000 DM$1,000 Total Assets6,600 DM$2,800 Current liabilities1,200 DM$600 Long-Term debt1,800 DM$600 Common stock2,700 DM$900 Retained earnings900
5、DM$700CTA-Total Liabilities and Equity6,600 DM$2,800 Monetary/Nonmonetary MethodlThe underlying principal is that monetary accounts have a similarity because their value represents a sum of money whose value changes as the exchange rate changes.lAll monetary balance sheet accounts(cash,marketable se
6、curities,accounts receivable,etc.)of a foreign subsidiary are translated at the current exchange rate.lAll other(nonmonetary)balance sheet accounts(owners equity,land)are translated at the historical exchange rate in effect when the account was first recorded.Monetary/Nonmonetary MethodlAll monetary
7、 balance sheet accounts are translated at the current exchange rate.e.g.DM2=$1lAll other balance sheet accounts are translated at the historical exchange rate in effect when the account was first recorded.e.g.DM3=$1Balance SheetLocal CurrencyMonetary/NonmonetaryCash2,100 DM$1,050 Inventory1,500 DM$5
8、00 Net fixed assets3,000 DM$1,000 Total Assets6,600 DM$2,550 Current liabilities1,200 DM$600 Long-Term debt1,800 DM$900 Common stock2,700 DM$900 Retained earnings900 DM$0CTA-Total Liabilities and Equity6,600 DM$2,400 Temporal MethodlThe underlying principal is that assets and liabilities should be t
9、ranslated based on how they are carried on the firms books.lBalance sheet account are translated at the current spot exchange rate if they are carried on the books at their current value.lItems that are carried on the books at historical costs are translated at the historical exchange rates in effec
10、t at the time the firm placed the item on the books.Temporal MethodlItems carried on the books at their current value are translated at the spot exchange rate.e.g.DM2=$1lItems that are carried on the books at historical costs are translated at the historical exchange rates.e.g.DM3=$1Balance SheetLoc
11、al CurrencyTemporalCash2,100 DM$1,050 Inventory1,500 DM$900Net fixed assets3,000 DM$1,000 Total Assets6,600 DM$2,950 Current liabilities1,200 DM$600 Long-Term debt1,800 DM$900 Common stock2,700 DM$900 Retained earnings900 DM$0CTA-Total Liabilities and Equity6,600 DM$2,400 Current Rate MethodlAll bal
12、ance sheet items(except for stockholders equity)are translated at the current exchange rate.lVery simple method in application.lA“plug”equity account named cumulative translation adjustment is used to make the balance sheet balance.Current Rate MethodlAll balance sheet items(except for stockholders
13、equity)are translated at the current exchange rate.lA“plug”equity account named cumulative translation adjustment is used to make the balance sheet balanceBalance SheetLocal CurrencyCurrent RateCashDM2,100$1,050 InventoryDM1,500$750 Net fixed assetsDM3,000$1,500 Total AssetsDM6,600$3,300 Current lia
14、bilitiesDM1,200$600 Long-Term debtDM1,800$900 Common stockDM2,700$900 Retained earningsDM900$360 CTA-$540 Total Liabilities and EquityDM6,600$3,300 How Various Translation Methods Deal with a Change from DM3 to DM2=$1Balance SheetLocal CurrencyCurrent/Noncurrent Monetary/NonmonetaryTemporalCurrent R
15、ateCash2,100 DM$1,050$1,050$1,050$1,050 Inventory1,500 DM$750$500$900$750 Net fixed assets3,000 DM$1,000$1,000$1,000$1,500 Total Assets6,600 DM$2,800$2,550$2,950$3,300 Current liabilities1,200 DM$600$600$600$600 Long-Term debt1,800 DM$600$900$900$900 Common stock2,700 DM$900$900$900$900 Retained ear
16、nings900 DM$700$150$550$360CTA-$540 Total Liabilities and Equity6,600 DM$2,800$2,550$2,950$3,300 Spot exchange rateearningsHow Various Translation Methods Deal with a Change from DM3 to DM2=$1Balance SheetLocal CurrencyCurrent/Noncurrent Monetary/NonmonetaryTemporalCurrent RateCash2,100 DM$1,050$1,0
17、50$1,050$1,050 Inventory1,500 DM$750$500$900$750 Net fixed assets3,000 DM$1,000$1,000$1,000$1,500 Total Assets6,600 DM$2,800$2,550$2,950$3,300 Current liabilities1,200 DM$600$600$600$600 Long-Term debt1,800 DM$600$900$900$900 Common stock2,700 DM$900$900$900$900 Retained earnings900 DM$700$150$550$3
18、60CTA-$540 Total Liabilities and Equity6,600 DM$2,800$2,550$2,950$3,300 Book value of inventory at spot exchange rateBook value of inventory historic rateCurrent value of inventory at spot exchange rate.earningsHow Various Translation Methods Deal with a Change from DM3 to DM2=$1Balance SheetLocal C
19、urrencyCurrent/Noncurrent Monetary/NonmonetaryTemporalCurrent RateCash2,100 DM$1,050$1,050$1,050$1,050 Inventory1,500 DM$750$500$900$750 Net fixed assets3,000 DM$1,000$1,000$1,000$1,500 Total Assets6,600 DM$2,800$2,550$2,950$3,300 Current liabilities1,200 DM$600$600$600$600 Long-Term debt1,800 DM$60
20、0$900$900$900 Common stock2,700 DM$900$900$900$900 Retained earnings900 DM$700$150$550$360CTA-$540 Total Liabilities and Equity6,600 DM$2,800$2,550$2,950$3,300 historic ratespot exchange rate.earningsHow Various Translation Methods Deal with a Change from DM3 to DM2=$1Balance SheetLocal CurrencyCurr
21、ent/Noncurrent Monetary/NonmonetaryTemporalCurrent RateCash2,100 DM$1,050$1,050$1,050$1,050 Inventory1,500 DM$750$500$900$750 Net fixed assets3,000 DM$1,000$1,000$1,000$1,500 Total Assets6,600 DM$2,800$2,550$2,950$3,300 Current liabilities1,200 DM$600$600$600$600 Long-Term debt1,800 DM$600$900$900$9
22、00 Common stock2,700 DM$900$900$900$900 Retained earnings900 DM$700$150$550$360CTA-$540 Total Liabilities and Equity6,600 DM$2,800$2,550$2,950$3,300 spot rateearningsHow Various Translation Methods Deal with a Change from DM3 to DM2=$1Balance SheetLocal CurrencyCurrent/Noncurrent Monetary/Nonmonetar
23、yTemporalCurrent RateCash2,100 DM$1,050$1,050$1,050$1,050 Inventory1,500 DM$750$500$900$750 Net fixed assets3,000 DM$1,000$1,000$1,000$1,500 Total Assets6,600 DM$2,800$2,550$2,950$3,300 Current liabilities1,200 DM$600$600$600$600 Long-Term debt1,800 DM$600$900$900$900 Common stock2,700 DM$900$900$90
24、0$900 Retained earnings900 DM$700$150$550$360CTA-$540 Total Liabilities and Equity6,600 DM$2,800$2,550$2,950$3,300 spot ratehistorical rateearningsHow Various Translation Methods Deal with a Change from DM3 to DM2=$1Balance SheetLocal CurrencyCurrent/Noncurrent Monetary/NonmonetaryTemporalCurrent Ra
25、teCash2,100 DM$1,050$1,050$1,050$1,050 Inventory1,500 DM$750$500$900$750 Net fixed assets3,000 DM$1,000$1,000$1,000$1,500 Total Assets6,600 DM$2,800$2,550$2,950$3,300 Current liabilities1,200 DM$600$600$600$600 Long-Term debt1,800 DM$600$900$900$900 Common stock2,700 DM$900$900$900$900 Retained earn
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