question archive Los Angeles Pierce CollegeACCOUNTING 17 A bank projects that currency translation will "depress reported revenues for the full fiscal year by 52 basis points"
Los Angeles Pierce CollegeACCOUNTING 17 A bank projects that currency translation will "depress reported revenues for the full fiscal year by 52 basis points"
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Los Angeles Pierce CollegeACCOUNTING 17
A bank projects that currency translation will "depress reported revenues for the full fiscal year by 52 basis points". This is because:
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Answer:
The currency used for translation (presentation currency) strengthens vs the functional currency (transaction currency).
Step-by-step explanation
When the translation currency tends to have higher value of functional currency, the company reports lesser equivalent amount in its accounting records.
For example US dollar presentation currency vs. Japanese Yen functional currency.
Dec1 1 USD = 100 JPY
Dec2 1 USD = 120 JPY
Revenue: 120,000 JPY
Translation:
Dec1 1,200 USD (higher value)
Dec2 1,000 USD (lower value)
As per above, you can see that the higher or stronger the value of USD, the lesser value it will report in its financial statements.
