Translations and Reporting Issues

| October 3, 2018

What is the concept of current rate method of translation and temporal method of translation? How does balance sheet exposure differ under these two methods?The 2010 financial statement of Child Co. Inc (Mexico), a subsidiary of Parent Co. Inc (United States), reveals the following information:Beginning InventoryPeso 100,000PurchasesPeso 500,000Ending InventoryPeso 150,000COGSPeso 450,000US dollar exchange rate for 1 Peso:January 1, 2010$0.45Average, 2010$0.42December 31, 2010$0.38The beginning inventory was acquired when the exchange rate was $0.50 last quarter of 2009; ending inventory was acquired when the exchange rate was $0.40 last quarter of 2010.Report amounts of ending inventory and cost of goods sold to be included in the consolidated financial statements under (1) Current rate method and (2) Temporal method.

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