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.© BrainMass Inc. brainmass.com October 25, 2018, 6:17 am ad1c9bdddf
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 ...
This solution helps with a problem about international accounting.
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:
Marketable Securities (cost)
Due to parent (denominated in dollars)
Deferred Income taxes
Premuim on common stock
Cost of sales
General and administrative expenses
Amortization of goodwill
Income tax expense
Intercompany interest expense