Discussion forum_Unit2

Foreign exchange gains or losses relating to securities measured at fair value and equity-accounted investments are part of fair value measurements or equity method of accounting.

the exchange gain(loss) are reported in other comprehensive income, not through the
profit or loss for the year, until the disposal of the net investment.

Exchange gain are reported in income statement

According to what I have learnt in Advanced Financial Reporting module especially in unit of change in foreign exchange, post -acquisition profits do not translated.

The gains and losses arising from foreign currency transactions that are recorded and translated at one rate and then result in transactions at a later date and different rate are recorded in the equity section of the balance sheet

According to class representer
the are two approaches for calculating exchange gain or loss on post -acquistion profit(loss)
Approach (1) opening net asset at year's closing rate less operating net asset for the year' closing rate . The gain or loss from here is added to the gain (loss) from comparison between profit for the year at average rate and profit for year at closing rate . gain (loss) should go to other comprehensive Incame .

1. We compare opening net asset at last years closing rate and opening net asset at this year closing rate then we found a gain or loss and;
2. We compare profit for the year at average rate and profit for the year at closing rate then we found gain or loss
3.we compare the above two net gain or loss then we found a net gain or net loss
4. that net gain or loss are transferred in statement of other comprehensive income

Exchange gain or loss on post-acquisition profit is calculated by compering the gain (loss) from opening balance net asset on closing rate less operating net asset at closing rate and gain (loss) from profit for the year at average rate less profit for the year at closing rate .
Net gain should go to other comprehensive Incame As Incame .

using example
Opening net assets (32 + 20 + 80) = 132m US$
RWFm
Opening net assets at last year’s closing rate (2.5) 52.8
Opening net assets at this year’s closing rate (2.1) 62.9
Gain 10.1
Profit for year = 15.8m US$
RWFm
Profit for year at average rate (2.0) 7.9
Profit for year at closing rate (2.1) 7.5
Loss 0.4
Total Net Gain 10.1 – 0.4 = 9.7
that net gain or loss are transferred in statement of other comprehensive income

Post profit it can not be transulate

translating the financial statement of a company for consolidation purpose they are mainly the following approaches: We compare opening net asset at last years closing rate and opening net asset at this year closing rate then we found a gain or loss and
compare the profit for the year at average rate and profit for the year at closing rate .
the above two net gain or loss then we found a net gain or net loss that must be translated or recognized into
statement of other comprehensive income

An exchange gain or loss is caused by a change in the exchange rate used such as when an invoice is entered in at one rate and paid at another ,it will generate an exchange gain or loss

We compare opening net asset at last years closing rate and opening net asset at this year closing rate then we found a gain or loss and;
2. We compare profit for the year at average rate and profit for the year at closing rate then we found gain or loss
3.we compare the above two net gain or loss then we found a net gain or net loss
4. that net gain or loss are transferred in statement of other comprehensive income

Exchange gain or loss which is part of the post acquisition profits these are profits or gains caused by exchange differences occurred after the acquisition

When translating the financial statements of an entity for consolidation purposes into the reporting currency of a business, translate the financial statements using the following rules: Assets and liabilities. Translate using the current exchange rate at the balance sheet date for assets and liabilities

Exchange gain or loss which is part of post acquisition these are gains or losses due to exchange differences of currencies of presentation currency and functional currency between parent company and subsidiary while consolidating group accounts.

when preparing the annual financial statements, the companies are required to report all transactions in their home currency to make easy for all stakeholders to understand the financial reports.This means that all transactions carried out in foreign currencies must be converted to the home currency at current exchange rate when the business recognizes transactions.Exchange gain or loss are reported in income statement.

Foreign currency transactions that are recorded and translated at one rate and then result in transactions at a later date and different rate give rise to gains or losses. Gains or losses from foreign currency transactions are included in current income.

When there is translation of currency of financial statement the risks occurs. The exchange gain or loss must be reported on comprehensive income .

The translation may lead to gain or loss and this loss or gain is reported in statement ofprofit or loss.
The treatment:we first traslate the foreign currency in the currency of the parent company then we consolidate after.

When there is any loss or profit arised during translating financial statement must be recorded in other comprehensive income.

Gain or loss arising from translating foreign currency are recorded in current income

compare opening net asset at this year closing rate,if we found gain or loss it must be translated or recognized into statement of other comprehensive income

Exchange gain or loss for post acquisition caused by exchange different are recorded in other comprehensive income

As Lecturer said when I represented he had shown the short way for finding exchange gain or loss we took post acquisition balancing figure compare with profit for the year after translation when post acquisition bal fig is greater than profit for the years is gain also recorded in other comprehensive income

Foreign exchange gain or loss relating to securities measured at fair value and equity accounted investment are part of fair value. By using accounting standard

An exchange gain or loss is caused by a change in the exchange rate used such as when an invoice is entered in at one rate and paid at another, this will generate an exchange gain or loss.
All exchange rate differences shall be recognized in profit or loss, with the following exceptions:
1. Exchange rate gains or losses on non-monetary items are recognized consistently with the recognition of gains or losses on an item itself. For example, when an item is revalued with the changes recognized in other comprehensive income, then also exchange rate component of that gain or loss is recognized in OCI, too.
2. Exchange rate gain or loss on a monetary item that forms a part of a reporting entity’s net investment in a foreign operation shall be recognized:
o In the separate entity’s or foreign operation’s financial statements: in profit or loss;
o In the consolidated financial statements: initially in other comprehensive income and subsequently, on disposal of net investment in the foreign operation, they shall be reclassified to profit or loss
Recording a Foreign Exchange Gain/Loss
When preparing the annual financial statements, companies are required to report all transactions in their home currency to make it easy for all stakeholders to understand the financial reports. This means that all transactions carried out in foreign currencies must be converted to the home currency at the current exchange rate when the business recognizes the transaction.
.

On this topic about exchange gain or loss caused by exchange different for post acquisition bal figure we compare with profit for the year after translation when post acquisition bal figure greater than profit for the year is gain also recorded in other comprehensive income

From my research,With reference to
IAS 21 post acquisition profit is obtained as balancing figure while translating the balance sheet of the subsidiary company into the currency of the parent company, and the exchange Gain/loss that could be taken as resulted from post acquisition profit will be got from translating the post acquisition profit/loss at average/closing rate if not given (average rate) and compare it with that gotten as balancing figure.

The exchange gain or loss will be reported to stetement of profit or losse,if the gain or losses of amaunt will be treated as a part of the net investment in foreigin operation by the reporting entity,
The foreign exchange gain or losses arising a translation of foreign operation (AIS21)

Profit or loss on conversion would be included in profit or loss for the year in which takes place and also we compare profit for the year at average rate and profit for year at closing rate then we obtain loss or gain

foreign exchange gain/loss arising a translation of foreign operation(AIS 21)
IT Records as part post acquisition ,because it is share of reporting entity in net asset of foreign operation

the gains and losses arising from foreign currency transactions that are recorded and translated at one rate and then result in transactions at a later date and different rate are recorded in the equity section of the balance sheet. The GAAP regulations require the items in the balance sheet be converted in accordance with the rate of exchange as on the date of balance sheet while income statement items are converted according to the weighted average rate of exchange.

With reference to IAS 21; post acquisition profit is obtained as balancing figure while translating the balance sheet of the subsidiary company into the currency of the parent company, and the exchange gain or loss that could be taken as resulted from Post acquisition profit will be got from translating the post acquisition profit or loss at average/closing rate if not given (average rate) and compare it with that gotten as balancing figure.

With reference to
IAS 21 post acquisition profit is obtained as balancing figure while translating the balance sheet of the subsidiary company into the currency of the parent company, and the exchange Gain/loss that could be taken as resulted from post acquisition profit will be got from translating the post acquisition profit/loss at average/closing rate if not given (average rate) and compare it with that gotten as balancing figure

Foreign exchange a gains or losses relating to securities measured at fair value equity accounted investment s are part of fair value measurement

My suggested answer are
According to class discussion,
the are two approaches for calculating exchange gain or loss on post -acquisition profit(loss)
Approach
Opening net asset at year's closing rate less operating net asset for the year' closing rate . The gain or loss from here is added to the gain (loss) from comparison between profit for the year at average rate and profit for year at closing rate.
Gain (loss) should go to other comprehensive Income
We compare opening net asset at last years closing rate and opening net asset at this year closing rate then we found a gain or loss and;
we compare profit for the year at average rate and profit for the year at closing rate then we found gain or loss
we compare the above two net gain or loss then we found a net gain or net loss
That net gain or loss are transferred in statement of other comprehensive income
The effects of changes in foreign exchange rates outlines how to account for foreign currency transactions and operations in financial statements, and how to translate financial statements into a presentation currency. an entity is required to determine a functional currency (for each of its operations if necessary) based on the primary economic environment in which it operates and generally records foreign currency transactions using the spot conversion rate to that functional currency on the date of the transaction

Exchange gain or a loss is recorded in the income section of the income statement . The profit or loss is determined by taking all revenue and substracting all expense from both operating and non operating activities

Foreign gain or losses relating to securities measured at fair value and equity accounted investements are recorded in statement profit and loss account and ather comprehensive income.

With reference to
IAS 21 post acquisition profit is obtained as balancing figure while translating the balance sheet of the subsidiary company into the currency of the parent company, and the exchange Gain/loss that could be taken as resulted from post acquisition profit will be got from translating the post acquisition profit/loss at average/closing rate if not given (average rate) and compare it with that gotten as balancing figure

First simply do this in the FOREIGN currency (ignore the post acquisition column) and then translate it at the following rates:

At Year End column - Year End Rate

At Acquisition column - Acquisition Rate

Now do the post-acquisition column - using the translated figures

Foreign Exchange Translation Reserve
How to calculate the Translation differences:

This can be calculated as follows:

Translation Reserve

Opening NA (@ opening rate) (x)
Profit (@ average rate) (x)
Balancing Figure (Forex Diff) X
Closing NA (@ closing rate) x

foreign exchage gain or loss become as a balancing figure in the equity becouse difference amount between parent company and subisidiary ,this difference gain or loss can be arise hyperinflation or deflation .when u did not use the price index used to them monetary items we are not restated becouse they are already included at the value in force at the date of financial statement position is prepared.

According to presenter on this topic represente he had shown the short way for finding exchange gain or loss we took post acquisition balancing figure compare with profit for the year after translation when post acquisition bal fig is greater than profit for the years is gain also recorded in other comprehensive income.

You need to eliminate the share capital and pre acquisition profits of subsidiary with parents investment in a subsidiary( plus recognize an goodwill and or non controlling interest)

Exchange gain or loss must be reported on comprehensive income after comparing opening net asset at last year closing rate and opening net asset at this year ( current year ) closing rate

A foreign exchange gain/loss occurs when a company buys and/or sells goods and services in a foreign currency, and that currency fluctuates relative to their home currency. It can create differences in value in the monetary assets and liabilities, which must be recognized periodically until they are ultimately settled.
The value of the foreign currency, when converted to the local currency of the seller, is called the exchange rate. As an example, if the value of the home currency increases after the conversion, the seller of the goods will have made a foreign currency gain.
However, if the value of the home currency declines after the conversion, the seller will have incurred a foreign exchange loss. If it is impossible to calculate the current exchange rate at the exact time when the transaction is recognized, the next available exchange rate can be used to calculate the conversion.

Exchange gain or loss which is part of the post acquisition profits these are profits or gains caused by exchange differences occurred after the acquisition

Because diference amount between parent and subsidiary leds Exchange gain or loss which is part of the post acquisition profits.

Exchange gain or loss which is part of post profit as became balancing figure in balance sheet because the difference amount between parents and subsidiary.

the exchange gain(loss) are reported in other comprehensive income, not through the
profit or loss for the year, until the disposal of the net investment.

On the other hand in the foreign currency ignore the post-acquisition.

First simply do this in the FOREIGN currency (ignore the post acquisition column) and then translate it at the following rates:

At Year End column - Year End Rate

At Acquisition column - Acquisition Rate

Now do the post-acquisition column - using the translated figures

Equity Table - Working
First simply do this in the FOREIGN currency (ignore the post acquisition column) and then translate it at the following rates:

At Year End column - Year End Rate

At Acquisition column - Acquisition Rate

Now do the post-acquisition column - using the translated figures

Foreign Exchange Translation Reserve
How to calculate the Translation differences:

This can be calculated as follows:

Translation Reserve

Opening NA (@ opening rate) (x)
Profit (@ average rate) (x)
Balancing Figure (Forex Diff) X
Closing NA (@ closing rate) x

In practical terms, the exchange gain or loss on components (1) & (2) is effectively calculated as one
item. The exchange gain or loss for the year on this item will be allocated between the group and NCI
based upon their respective shareholdings.
Depending upon the accounting policy for goodwill, the exchange gain or loss for the year will be
allocated between the group and NCI based upon either their respective shareholdings (full goodwill
method) or solely to the group (proportionate goodwill method).

Exchange gain or loss which is part of the post acquisition profits these are profits or gains caused by exchange differences occurred after the acquisition

First simply do this in the FOREIGN currency (ignore the post acquisition column) and then translate it at the following rates:

At Year End column - Year End Rate

At Acquisition column - Acquisition Rate

Now do the post-acquisition column - using the translated figures

First simply do this in the FOREIGN currency (ignore the post acquisition column) and then translate it at the following rates:

At Year End column - Year End Rate

At Acquisition column - Acquisition Rate

Now do the post-acquisition column - using the translated figures

Foreign Exchange Translation Reserve
How to calculate the Translation differences:

This can be calculated as follows:

Translation Reserve

Opening NA (@ opening rate) (x)
Profit (@ average rate) (x)
Balancing Figure (Forex Diff) X
Closing NA (@ closing rate) x

Foreign exchange trading involves buying and selling currencies with the intent of making a profit

When translating the financial statements of an entity for consolidation purposes into the reporting currency of a business, to translate the financial statements using the following rules:
Assets and liabilities: to translate using the current exchange rate of the balance sheet date for assets and liabilities
Income statement items: this is translating revenues, expenses, gains and losses using the exchange rate as of the dates when those items were originally recognized.
Allocations: this translate all expenses and revenues allocations using the exchange ratesin effect when those allocations are recorded, examples of allocations are depreciation and amortizations
Profit eliminations: if there are intra entity profits to be eliminated as part of the consolidation apply the exchange rate in effect on the dates when the underlying transactions took places
Statements of cash flows: this state all foreign currency cash flows at their reporting currency equivalent using the exchange rate in effect when the cash flows occurred. A weighted average exchange rate may be used for this calculations.
If there is translation adjustment resulting from the implementations of these rules, record the adjustments in the shareholders’ equity section of the parent company’s consolidated balance sheet. If the process of converting the financial statements of an entity into the reporting currency of a parent company results profit or loss in other comprehensive income
When preparing the annual financial statements, companies are required to report all transactions in their home currency to make it easy for all stakeholders to understand the financial reports. This means that all transactions carried out in foreign currencies must be converted to the home currency at the current exchange rate when the business recognizes the transaction.

foreign exchange gain/loss occurs when a company buys and/or sells goods and services in a foreign currency, and that currency fluctuates relative to their home currency. It can create differences in value in the monetary assets and liabilities, which must be recognized periodically until they are ultimately settled.

Foreign exchange gains or losses relating to securiting measured at fair value and equity -accounted investment or equity method of accounting . A change in the fair value of securities available for sale is recognized on equity accounts in accounting.

A company had to recognize the gains or losses in their profit and loss (P&L) account, even if these were not actually realized.
A company can either transfer it to the balance sheet or adjust it against the P&L account.

Exchange gain or loss which is part of the post acquisition profits arises from changes in exchange rates at different dates. Take the instance of goods being sold on credit at a particular date and valued at a given price relevant to the exchange rates at that same date. If, at a later date, debtors settle their obligations in respect of the goods that had passed to them on credit and the settlement relates to the amount agreed at the date the transaction occurred, changes in exchange rates with changes in dates consequently result in exchange gain or loss on the amount settled.

Exchange gain when preparing annual financial statement companies are required to report all transactions in their home currencies to make them eassy for stakeholders to understand financial report. This means that all transactions carried out in foreign currency must be converted to home currency at current exchange rate.

post-acquisition profits the profits made by a company after the date of its acquisition or TAKEOVER by the HOLDING COMPANY. Such post-acquisition profits belong to the new shareholders of the company .

Calculate post acquisition profits

After the date of purchasing the shares of subsidiary company , profit of subsidiary company will also deem of holding company and it include in the profit of holding company and we also separate the part of profit of minority interest and add in minority interest’s value and shown in liability side .

According to class representer
the are two approaches for calculating exchange gain or loss on post -acquistion profit(loss)
Approach (1) opening net asset at year's closing rate less operating net asset for the year' closing rate . The gain or loss from here is added to the gain (loss) from comparison between profit for the year at average rate and profit for year at closing rate . gain (loss) should go to other comprehensive Incame

An exchange gain or loss is caused by a change in the exchange rate used such as when an invoice is entered in at one rate and rate and paid at another ,it will generate an exchange gain or loss.

When translating the financial statement of any given company for consolidation purpose these are mainly following approaches: We compare opening net asset at last years closing rate and opening net asset at this year closing rate then we find a gain or loss and
compare the profit for the year at average rate and profit for the year at closing rate .
the above two net gain or loss then we find a net gain or net loss that can be translated or recognized within the
statement of other comprehensive income !!

An exchange gain or loss is caused by a change in the exchange rate used such as when an invoice is entered in at one rate and paid at another, this will generate an exchange gain or loss.
If you want to combine the financial statements prepared in different currencies, you will still follow the same consolidation procedures:
You still need to eliminate the share capital and pre-acquisition profits of a subsidiary with parent’s investment in a subsidiary (plus recognize any goodwill and/or non-controlling interest).
You still need to eliminate intragroup balances and transactions, including unrealized profits on intragroup sales and any dividends paid by a subsidiary to a parent.
Recording a Foreign Exchange Gain/Loss
When preparing the annual financial statements, companies are required to report all transactions in their home currency to make it easy for all stakeholders to understand the financial reports. This means that all transactions carried out in foreign currencies must be converted to the home currencies.
For example: let assume that a company paid €10,000 in salaries for part-time contractors located in Europe at an exchange rate of $1.15 to 1 euro, the transaction is recorded in the income statement as $11,500 at the end of the accounting period.

1. We compare opening net asset at last years closing rate and opening net asset at this year closing rate then we found a gain or loss and;
2. We compare profit for the year at average rate and profit for the year at closing rate then we found gain or loss
3.we compare the above two net gain or loss then we found a net gain or net loss
4. that net gain or loss are transferred in statement of other comprehensive income

Foreign currency translation is used to convert the results of a parent company's foreign subsidiaries to its reporting currency. This is a key part of the financial statement consolidation process. The steps in this translation process are as follows:

Determine the functional currency of the foreign entity.

Remeasure the financial statements of the foreign entity into the reporting currency of the parent company.

Record gains and losses on the translation of currencies.