[LeBronJames]

I was struggling with this topic and noticed other people on here were too. I wanted to post a topic that could help people understand the basics without drowning them with too much info. Its what i think of when I get an FX question and its helped me to get most of the questions on this topic correct. For those that think this is too long, just skip down to the bottom portion.

The goal of FX translation and remeasurement is to have everyone (parent and sub) in the reporting currency. This way a clean set of financials can be issued by the parent in one single currency. Simple enough right?

Well, the only way for the sub to get to the Reporting currency is by way of the Functional Currency. Think of the Functional Currency as a bridge to get to our destination (the reporting currency). Functional currency is basically the currency in which we do business (generate revenue etc).

So step 1 is always, GET TO THE FUNCTIONAL CURRENCY. If we as a sub are at the functional currency, Great! All we have to do is simply translate to the reporting currency. We were already at the bridge, and now all we have to do is cross it. Gains and losses will affect OCI.

However, sometimes the Sub is not in its Functional Currency. It may be using some other foreign currency. Well now we have a two step process. We are not at the bridge yet, so we still have to drive to the bridge, once we are there we can simply cross it (translate it). So Step 1, GET TO THE FUNCTIONAL CURRENCY. Any move to the functional currency is done via REMEASUREMENT. Gains and losses here affect the income statement. So we remeasure to functional (drive to the bridge), then we cross the bridge (translate from functional to reporting.).

Briefly:

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> Functional (requires remeasurement, I/S)

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> Reporting (requires translation, OCI)

Hope this helps

[CPA50]

Thanks! That was HUGELY helpful 🙂 Not bad accounting for a basketball player 😉

AUD - 80
BEC - 77
FAR - 80
REG - 80

3 years

+ 16 tests

+ 2 expired sections

= DONE FOREVER!

AUD 88 (expired), 80 retake
FAR 64,69,67,73,67,73,73,73, August 3
REG 75 (expired) September 7
BEC 72, 77

The adventure continues...

[kpb]

I always appreciate posts like this, when people take complicated and badly worded topics from the books and put it in English for the rest of us that are struggling with it.

Thanks 🙂

BEC - 81 4/08/14
FAR - 80 8/25/14 Thank you Jesus!
REG - 69 (Nov 14),80 1/08/15 Thank God!
AUD - 70 (May 14), xx 5/1/15

Becker Online & Becker Flashcards
I definitely wish I was one of those people who got all 4 exams done in 4 months, but unfortunately LIFE (being a newlywed, stress, adjusting to newlywed life and cpa exam study life, as well as starting a job with a Big4 which I am very happy about) got in the way, just happy that I am passing period!!

I can do all things through Christ who strengthens me!

[jstay]

excellent! this topic killed me (and my confidence) today, hopefully i commit this memory and it helps on the exam!

to drained now to commit it to memory but it definitely seemed helpful and dumbed it down..FX can really be a pain

[Author]

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