Current Rate Method: Translation Method of Foreign Financial Statements | Advanced Accounting | CPA

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This is lectures, I cover translation of financial statement using the current method. Under the current method, all assets and liabilities are translated using the current exchange rate on the balance sheet date. For income statement accounts (revenues and expenses),a weighted-average exchange rate is used to approximate the results that would be obtained from translation of each transaction. Under the temporal method, monetary assets and liabilities are translated at the current exchange rate. Assets and liabilities carried at historical cost are translated at historical exchange rates. Assets and liabilities carried at current values (such as inventory carried at market under the lower of cost or market rule) are translated at the cur- rent exchange rate. Revenues and expenses that relate to assets and liabilities translated at historical rates (such as depreciation expense, amortization expense, and the cost of sales) are translated at the historical rates used for the related assets and liabilities. Other revenues and expenses are converted using a weighted-average rate.
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[@raziyabanu9392]

What does exchange rate as on the date of dividend remittance means in this context?

[@AccountingLectures]

When (date) they send the dividend payment.

[@jeffnichols3513]

So the ending entry would be a debit to cumulative translation adjustment and a credit to what?

[@raceparkug9184]

May you please help me clarify if da rates are given

[@diwassaxena1455]

Whose forex rate to be used for debtor or creditor at balance sheet date, is there specific guidelines to use rbi reference rate sbi rate or any other rate

[@financearabella9916]

the rate at the year end of the balance sheet

[@ritahjamitah4584]

the problem i have found here is that my teacher in class would divide the amount by the rate and you are multiplying. What is the difference.

[@AccountingLectures]

Hi Ritah, which amount and which rate?

[@financearabella9916]

It depends on the currency E.g if the reporting currency is Nigeria Naira for example and exchange rate says N45 to 1 cedis and we have assets in Nigeria Naira as N450,000 conversion will be 450.000/45 but if the conversion rate is 0.56 Cedis to N1 it will be 450,000x0.56 and vice versa

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[@AccountingLectures]

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