Question #71 - Reading 10 Multinational Operations

Reading: Reading 10 Multinational Operations

PDF File: Reading 10 Multinational Operations.pdf

Page: 40

Status: Unattempted

Shared Context

- On APJ's 2012 balance sheet, the level of accounts receivable is U.S. dollars would be closest to: A) $110. B) $132. C) $330.

Question

If the functional currency is the reporting currency, the exposure and the foreign currency movements are most likely to result in a:

Answer Choices:

A. remeasurement loss

B. cumulative translation adjustment loss

C. remeasurement gain

Explanation

APJ has a net monetary asset exposure: Total monetary assets: Cash + A/R A$771 / (3.00 A$/US$) = US$257 Total monetary liabilities: A$210 / (3.00 A$/US$) = US$70 Net monetary asset = US$187 Because the functional currency is the reporting currency, the temporal method is used and this means there is remeasurement – a loss as the foreign currency, the A$, is depreciating. Exposure Foreign Currency Temporal method: Appreciating Depreciating Net monetary assets Gain Loss Net monetary liabilities Loss Gain

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