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International Accounting - Foreign Currency Translation

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A foreign currency transaction can be denominated in one currency, yet measured in another. Explain the difference between these two terms using the case of a Canadian dollar borrowing on the part of a Mexican affiliate of a U.S. parent company that designates the U.S. dollar as a functional currency.

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The identifying factor on whether a foreign currency transaction should be denominated in one currency (translation) or measured in another (remeasurement) is the transacting entity's functional currency. Functional currency is the ...

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This solution helps with a problem about international accounting.

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International Accounting Foreing Currency Translation

A 100 percent owned foreign subsidiary's trial balance consist of the account listed as follows. Which exchange rate - current, historical, or average would be used to translate these accounts to parent currency assuming that the foreign currency is the functional currency? Which rates would be used if the parent currency were the functional currency?

Trial Balance Accounts:
Cash
Marketable Securities (cost)
Accounts receivable
Inventory
Equipment
Accumulated depreciation
Prepaid Expenses
Due to parent (denominated in dollars)
Bonds payable
Deferred Income taxes
Common Stock
Premuim on common stock
Retained earnings
Sales
Purchases
Cost of sales
General and administrative expenses
Selling expenses
Depreciation
Amortization of goodwill
Income tax expense
Intercompany interest expense

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