Foreign Currency Financial Reporting from Euro to Yen to Yuan : A Guide to Fundamental Concepts and Practical Applications

by Rowan, Robert

• ISBN13: 9781118024423
• ISBN10: 1118024427
• Format: Hardcover
• Copyright: 2011-04-05
• Publisher: Wiley

Summary

As the world is becoming a smaller place and more and more companies take part in global transactions, the reporting of foreign currency has become an issue. Companies must report their foreign currency transactions on their financial statements. This book will provide a primer on how to report foreign currency transactions as well as guidance on building a computer program for such reporting. Written in a user-friendly style, this book will focus on the fundamental concepts of foreign currency transactions. The foundation provided in this book will allow corporations to accurately and consistently report past transactions and also allow them to look into the future to forecast and foresee the impacts that changing exchange rates could have on their businesses.

Author Biography

ROBERT ROWAN, CPA, CITP, is an International Finance Controller at SAS, the world's largest privately held software company. He engages in subsidiary and holding company financial transactions, reviews GAAP and IFRS accounting issues, and conducts financial consolidation and reporting. Previously at SAS, he worked in the SAS Research and Development Division designing and developing the SAS Financial Management product. Prior experience includes positions at a Fortune 500 publicly listed company, a global chemical manufacturer with eighty subsidiaries, a private international software company as part of the initial public offering team, and Ernst & Young LLP.

Table of Contents

Preface

Acknowledgments

Introduction to Foreign Currency and Exchange Rates

Who You Are

What You Know

A Changing Environment

Certainty in Uncertain Times

Notes

The Basics

Isn?t Currency Conversion Just Multiplication?

Conversion

The First Complication: It?s Not Just Multiplication

From Where Do Exchange Rates Come?

The Market

A Second Complication: Triangulation

Triangulation with Cross Rates

Quotes

Currencies and Exchange Rates: Highlights of Their Relevance and Recent History

Burgers and Currency

Notes

Exchange Rate Tables

Getting from Yen to Euros without Losing Your Way

The Foundation and Caveats

Terms and Terminology

Triangulation and Cross Rates - Redux

Exchange Rate Tables

Keep It Simple

Notes

Approximation

When Mathematics, Computer Science, and Regulations Converge

The Original Data: Accurate and Precise

Significant Digits and Scientific Notation

Precision

Accuracy

What Division Means for Computers

Single Precision and Double Precision Floating Point

Accuracy, Precision, and Credibility

Notes

Key Concepts and Authoritative Standards

What?s in a Name?

Standards

A Brief Background

IFRS Predominance with an FASB Pedigree

The Economic Essence: From Names to Definitions

Functional Currency

All the Rest

A Foundation

Notes

The Gold Standard

Following the Standard for Fiat Currencies

The Gold Standard for Financial Reporting

IAS21 and ASC 830: Converged, But Not Identical

Translation Overview

Translation - Not Conversion

Translation of Income and Expense

Averages

Simple Translation

Translation 1: Basic

Translation 2: Intermediate

Convenience Translation

The Standard

Notes

They?re Not Synonyms

Transaction to Translation, Revaluation to Remeasurement

Transactions and Translation

Transactions in a Foreign Currency

Reporting at Balance Sheet Dates

Remeasurement

Best of Intentions: Companies? Divergent Paths

Changing Functional Currency

Knowledge Worth Having

Notes

Practical Applications (and More Concepts)

The Intersection

Interplay of Mathematics, Exchange Rates, Accounting Standards, Economics, and Time

Time Concepts: PA, PIT, and POT

The Missing Piece

Equity and Complex Rates

Hybrids

Cash Flow Affected by Exchange Rates

Negative Exchange Rates

Intercompany Transactions

Frequency

Make the Transformation

Notes

Practical Knowledge

Things You Should Know

Exchange Rate Impact: Basic Information

Analyzing the Exchange Rate Impact

Constant Currency: A Second Fix

Improving Constant Currency

Analysis and Automation

Multiple Exchange Rate Scenarios

Constant Year: A Third Fix

Looking Forward: Beyond the Constants

Practical Examples or Cautionary Tales

Financial Reporting and Management Reporting

Notes

Practical Knowledge

Things You Can Learn

A Problem at the Source

Change It - Use It - Analyze It

Year-to-Date Translation

Crossing Zero: A Change in Sign

The School of Experience

Notes

Cumulative Translation Adjustment (CTA)

The Algebraic Plug

Baggage from the Past: Accumulating the Translation Adjustment

Recalculating CTA

Translation Adjustment and Intra-Group Monetary Transactions

Cumulative Translation Adjustment is not Remeasurement

A Little Fun with CTA

Problem Solved

Notes

The Residual

Redenomination

Devaluations and Revaluations

Hyperinflationary Economies

Euro Adoption

Non-monetary Assets (Inventory) Measured in a Foreign Currency

Disposal of a Foreign Operation

A Simple Forward Contract: Hedging

Heuristic Approach

Notes

Conclusion: Re-invent the Triangle

Innovate and Advocate

The Benefit

Notes

World Currency Formats and ISO 4217 Information

Useful Links, and Why They're Useful

Exchange Rate Requirements

Definition of Actual Rates

Definition of Constant Currency Rates

Definition of Forecast Rates

Definition of Views

Definition of High (USH) and Low (USL) Rates

Definition of Rates in the Tables

Glossary

About the Author

Table of Contents provided by Publisher. All Rights Reserved.