国际财务管理课后习题答案chapter 10.docx
- 文档编号:29983660
- 上传时间:2023-08-04
- 格式:DOCX
- 页数:23
- 大小:45.11KB
国际财务管理课后习题答案chapter 10.docx
《国际财务管理课后习题答案chapter 10.docx》由会员分享,可在线阅读,更多相关《国际财务管理课后习题答案chapter 10.docx(23页珍藏版)》请在冰豆网上搜索。
国际财务管理课后习题答案chapter10
CHAPTER10MANAGEMENTOFTRANSLATIONEXPOSURE
SUGGESTEDANSWERSANDSOLUTIONSTOEND—OF-CHAPTER
QUESTIONSANDPROBLEMS
QUESTIONS
1.Explainthedifferenceinthetranslationprocessbetweenthemonetary/nonmonetarymethodandthetemporalmethod.
Answer:
Underthemonetary/nonmonetarymethod,allmonetarybalancesheetaccountsofaforeignsubsidiaryaretranslatedatthecurrentexchangerate.Otherbalancesheetaccountsaretranslatedatthehistoricalrateexchangerateineffectwhentheaccountwasfirstrecorded。
Underthetemporalmethod,monetaryaccountsaretranslatedatthecurrentexchangerate。
Otherbalancesheetaccountsarealsotranslatedatthecurrentrate,iftheyarecarriedonthebooksatcurrentvalue.Iftheyarecarriedathistoricalvalue,theyaretranslatedattherateineffectonthedatetheitemwasputonthebooks.Sincefixedassetsandinventoryareusuallycarriedathistoricalcosts,thetemporalmethodandthemonetary/nonmonetarymethodwilltypicallyprovidethesametranslation。
2。
Howaretranslationgainsandlosseshandleddifferentlyaccordingtothecurrentratemethodincomparisontotheotherthreemethods,thatis,thecurrent/noncurrentmethod,themonetary/nonmonetarymethod,andthetemporalmethod?
Answer:
Underthecurrentratemethod,translationgainsandlossesarehandledonlyasanadjustmenttonetworththroughanequityaccountnamedthe“cumulativetranslationadjustment"account。
Nothingpassesthroughtheincomestatement。
Theotherthreetranslationmethodspassforeignexchangegainsorlossesthroughtheincomestatementbeforetheyenterontothebalancesheetthroughtheaccumulatedretainedearningsaccount。
3.IdentifysomeinstancesunderFASB52whenaforeignentity’sfunctionalcurrencywouldbethesameastheparentfirm’scurrency。
Answer:
ThreeexamplesunderFASB52,wheretheforeignentity’sfunctionalcurrencywillbethesameastheparentfirm’scurrency,are:
i)theforeignentity’scashflowsdirectlyaffecttheparent’scashflowsandarereadilyavailableforremittancetotheparentfirm;ii)thesalespricesfortheforeignentity’sproductsareresponsiveonashort—termbasistoexchangeratechanges,wheresalespricesaredeterminedthroughworldwidecompetition;and,iii)thesalesmarketisprimarilylocatedintheparent’scountryorsalescontractsaredenominatedintheparent'scurrency。
4。
DescribetheremeasurementandtranslationprocessunderFASB52ofawhollyownedaffiliatethatkeepsitsbooksinthelocalcurrencyofthecountryinwhichitoperates,whichisdifferentthanitsfunctionalcurrency.
Answer:
Foraforeignentitythatkeepsitsbooksinitslocalcurrency,whichisdifferentfromitsfunctionalcurrency,thetranslationprocessaccordingtoFASB52isto:
first,remeasurethefinancialreportsfromthelocalcurrencyintothefunctionalcurrencyusingthetemporalmethodoftranslation,andsecond,translatefromthefunctionalcurrencyintothereportingcurrencyusingthecurrentratemethodoftranslation.
5。
Itis,generally,notpossibletocompletelyeliminatebothtranslationexposureandtransactionexposure。
Insomecases,theeliminationofoneexposurewillalsoeliminatetheother。
Butinothercases,theeliminationofoneexposureactuallycreatestheother。
Discusswhichexposuremightbeviewedasthemostimportanttoeffectivelymanage,ifaconflictbetweencontrollingbotharises.Also,discussandcritiquethecommonmethodsforcontrollingtranslationexposure。
Answer:
Sinceitis,generally,notpossibletocompletelyeliminatebothtransactionandtranslationexposure,werecommendthattransactionexposurebegivenfirstprioritysinceitinvolvesrealcashflows.Thetranslationprocess,on—the-otherhand,hasnodirecteffectonreportingcurrencycashflows,andwillonlyhavearealizableeffectonnetinvestmentuponthesaleorliquidationoftheassets。
Therearetwocommonmethodsforcontrollingtranslationexposure:
abalancesheethedgeandaderivativeshedge。
Thebalancesheethedgeinvolvesequatingtheamountofexposedassetsinanexposurecurrencywiththeexposedliabilitiesinthatcurrency,sothenetexposureiszero。
Thuswhenanexposurecurrencyexchangeratechangesversusthereportingcurrency,thechangeinassetswilloffsetthechangeinliabilities。
Tocreateabalancesheethedge,oncetransactionexposurehasbeencontrolled,oftenmeanscreatingnewtransactionexposure。
Thisisnotwisesincerealcashflowlossescanresult.Aderivativeshedgeisnotreallyahedge,butratheraspeculativeposition,sincethesizeofthe“hedge”isbasedonthefutureexpectedspotrateofexchangefortheexposurecurrencywiththereportingcurrency.Iftheactualspotratediffersfromtheexpectedrate,the“hedge”mayresultinthelossofrealcashflows。
PROBLEMS
1。
AssumethatFASB8isstillineffectinsteadofFASB52.ConstructatranslationexposurereportforCentraliaCorporationanditsaffiliatesthatisthecounterparttoExhibit10.7inthetext。
Centraliaanditsaffiliatescarryinventoryandfixedassetsonthebooksathistoricalvalues。
Solution:
ThefollowingtableprovidesatranslationexposurereportforCentraliaCorporationanditsaffiliatesunderFASB8,whichisessentiallythetemporalmethodoftranslation。
ThedifferencebetweenthenewreportandExhibit10。
7isthatnonmonetaryaccountssuchasinventoryandfixedassetsaretranslatedatthehistoricalexchangerateiftheyarecarriedathistoricalcosts。
Thus,theseaccountswillnotchangevalueswhenexchangerateschangeandtheydonotcreatetranslationexposure。
ExaminationofthetableindicatesthatunderFASB8thereisnegativenetexposurefortheMexicanpesoandtheeuro,whereasunderFASB52thenetexposureforthesecurrenciesispositive。
ThereisnochangeinnetexposurefortheCanadiandollarandtheSwissfranc。
Consequently,iftheeurodepreciatesagainstthedollarfrom€1。
1000/$1。
00to€1。
1786/$1。
00,asthetextexampleassumed,exposedassetswillnowfallinvaluebyasmalleramountthanexposedliabilities,insteadofviceversa。
Theassociatedreportingcurrencyimbalancewillbe$239,415,calculatedasfollows:
ReportingCurrencyImbalance=
-
€3,949,000
0
€1.1786
/
$1.00
-
-
€3,949,000
0
€1.1000
/
$1.00
=
$239,415.
TranslationExposureReportunderFASB8forCentraliaCorporationanditsMexicanandSpanishAffiliates,December31,2005(in000CurrencyUnits)
Canadian
Dollar
Mexican
Peso
Euro
Swiss
Franc
Assets
Cash
CD200
Ps6,000
€825
SF0
Accountsreceivable
0
9,000
1,045
0
Inventory
0
0
0
0
Netfixedassets
0
0
0
0
Exposedassets
CD200
Ps15,000
€1,870
SF0
Liabilities
Accountspayable
CD0
Ps7,000
€1,364
SF0
Notespayable
0
17,000
935
1,400
Long-termdebt
0
27,000
3,520
0
Exposedliabilities
CD0
Ps51,000
€5,819
SF1,400
Netexposure
CD200
(Ps36,000)
(€3,949)
(SF1,400)
2。
AssumethatFASB8isstillineffectinsteadofFASB52。
ConstructaconsolidatedbalancesheetforCentraliaCorporationanditsaffiliatesafteradepreciationoftheeurofrom€1.1000/$1。
00to€1。
1786/$1.00thatisthecounterparttoExhibit10。
8inthetext.Centraliaanditsaffiliatescarryinventoryandfixedassetsonthebooksathistoricalvalues。
Solution:
ThisproblemisthesequeltoProblem1.ThesolutiontoProblem1showedthatiftheeurodepreciatedtherewouldbeareportingcurrencyimbalanceof$239,415。
UnderFASB8thisiscarriedthroughtheincomestatementasaforeignexchangegaintotheretainedearningsonthebalancesheet。
Thefollowingtableshowsthatconsolidatedretainedearningsincreasedto$4,190,000from$3,950,000inExhibit10.8。
Thisisanincreaseof$240,000,whichisthesameasthereportingcurrencyimbalanceafteraccountingforroundingerror。
ConsolidatedBalanceSheetunderFASB8forCentraliaCorporationanditsMexicanandSpanishAffiliates,December31,2005:
Post-ExchangeRateChange(in000Dollars)
CentraliaCorp。
(parent)
Mexican
Affiliate
Spanish
Affiliate
ConsolidatedBalanceSheet
Assets
Cash
$950a
$600
$700
$2,250
Accountsreceivable
1,450b
900
887
3,237
Inventory
3,000
1,500
1,500
6,000
InvestmentinMexicanaffiliate
-c
-
-
—
InvestmentinSpanishaffiliate
—d
—
-
—
Netfixedassets
9,000
4,600
4,000
17,600
Totalassets
$29,087
LiabilitiesandNetWorth
Accountspayable
$1,800
$700b
$1,157
$3,657
Notespayable
2,200
1,700
1,043e
4,943
Long—termdebt
7,110
2,700
2,987
12,797
Commonstock
3,500
—c
—d
3,500
Retainedearnings
4,190
-c
—d
4,190
Totalliabilitiesandnetworth
$29,087
aThisincludesCD200,000theparentfirmhasinaCanadianbank,carriedas$150,000。
CD200,000/(CD1。
3333/$1.00)=$150,000。
b$1,750,000-$300,000(=Ps3,000,000/(Ps10。
00/$1。
00))intracompanyloan=$1,450,000。
c,dInvestmentinaffiliatescancelswiththenetworthoftheaffiliatesintheconsolidation。
eTheSpanishaffiliateowesaSwissbankSF375,000(÷SF1.2727/€1.00=€294,649).Thisiscarriedonthebooks,
aftertheexchangeratechange,aspartof€1,229,649=€294,649+€935,000。
€1,229,649/(€1。
1786/$1。
00)=$1,043,313。
3。
InExample10.2,aforwardcontractwasusedtoestablishaderivatives“hedge"toprotectCentraliafromatranslationlossiftheeurodepreciatedfrom€1.1000/$1。
00to€1。
1786/$1.00.Assumethatanover—the—counterputoptionontheeurowithastrikepriceof€1.1393/$1。
00(or$0。
8777/€1.00)canbepurchasedfor$0.0088pereuro。
Showhowthepotentialtranslationlosscanbe“hedged"withanoptioncontrac
- 配套讲稿:
如PPT文件的首页显示word图标,表示该PPT已包含配套word讲稿。双击word图标可打开word文档。
- 特殊限制:
部分文档作品中含有的国旗、国徽等图片,仅作为作品整体效果示例展示,禁止商用。设计者仅对作品中独创性部分享有著作权。
- 关 键 词:
- 国际财务管理课后习题答案chapter 10 国际 财务管理 课后 习题 答案 chapter