Answer the questions:
1.When it comes to translating the financial statements of entities in highly inflationary countries, which of the following approaches makes more sense and why? What are the implications of this for ABC Corporation?
- 1st option – Remeasure using the temporal method, even though the functional currency is the local currency for operation purposes.
- 2nd option – Restate for inflation and translate using the current rate method.
2. Why do currency differences affect foreign exchange reporting? Specifically, how do these differences impact ABC Corporation? What difference has the introduction of a comprehensive income statement made to U.S. national accounting for foreign exchange? Assuming that a U.S. company has a subsidiary around the world and the foreign entity is relatively independent from the parent company, how would you anticipate that the exchange rates would impact the results of operations when translated into dollars?
Must be at least one page long.