Chapter 10

Intended to reduce translation exposure of an MNC by eliminating the mismatch of exposed net assets and exposdd net liabilities denominated in the same currency.

Used in the current rate method of translating foreign currency financial statements, this equity account allows balancing of the balance sheet by accounting for translation gains and losses.

In dealing with foreign currency translation, the idea that current assets and liabilities are converted at the current exchange rate while noncurrent assets and liabilities are translated at the historical exchange rates.

In dealing with foreign currency translation, the idea that all balance sheet accounts are translated at the current exchange rate except stockholder's equity, which is translated at the exchange rate on the date of issuance.

An attempt to control translation exposure that really involves speculation about foreign exchange rate changes.

For a foreign subsidiary of an MNC, it is the currency of the primary economic environment in which the entity operates. This is typically the local currency of the coutnry in which the entity conducts most of its business.

In dealing with foreign currency translation, the idea that monetary balance sheet accounts such as accounts receivable are translated at the current exchange rate while nonmonetary balance sheet accoutns such as stockholder's equity are converted at the historical exchange rate.

The currency in which an MNC prepares its consolidated financial statements. Typically this is the currency in which the parent firm keeps its books.

In dealing with foreign currency translation, the idea that current and noncurrent monetary accounts as well as accounts that are carried on the books at current value are converted at the current exchange rate. Accounts carried on the books at historical cost are translated at the historical exchange rate.

The effect of an unanticipated change in the exchange rates on the consolidated financial reports of an MNC.

This shows, for each account that is included in the consolidated balance sheet, the amount of foreign exchange exposure that exists for each foreign currency in which the MNC has exposure.