Temporal Method vs Current Method in Hyper-inflationary environment
Date: May 29, 2010 06:51AM
Could anyone advise me on 2 points?
1 : when a subsidiary operates on an hyper-inflationary environment (>100% over 3Years), do we need to use the Temporal Method (FASB) or still use the current method by first adjusting BS account for inflation and then apply the correct X rate?
2 : when the foreign ccy is depreciating, when do we recognize a loss or a gain when translating FS in the parent ccy?
Thanks in advance,
Date: May 29, 2010 11:12AM
OK thanks Brian
Date: May 29, 2010 11:15AM
adjust for inflation than translate using all current
Apply temporal directly
Gains and losses depend on if there is a net asset postion or a net liability position
Current rate Method
when foreign currency appreciates and there is a net asset position that results in a gain. opposite for net liability position
when foreign currency appreciates and there is a net monetary asset position that results in a gain. opposite for net monetary liability position