In 2015 morning mock qn 23,
In the current rate method, the share capital and opening retained earnings use the rate at the date of acquisition (1 July), and the change in retained earnings is equal to the net earnings (loss) for the period at the average rate (July–December).
I cant find any reference in CFAI or Kaplan or Wiley. May I know for beginning retained earnings, how exactly is this computed? Using the historical rate @ the date of acquisition?
Thanks a lot.
Once derived from P/L as current period earning based on average rate (R-X), reported earnings of prior year has been brought to retained earnings BS position and upon CR method measured and translated to parent reporting currency by current exchange rate on next BS date (eg. 31st December).
It’s simply last-year’s ending retained earnings.
The exchange rate is a messy combination of historical and current rates, and it doesn’t matter. You’re not using an exchange rate to get it; you’re adding and subtracting a bunch of numbers converted at their own rates and getting a total.
I don’t agree but it really doesn’t matter…
With which part don’t you agree? Why?
May I know if u haf access to the qn pls?
Qn22 of 2015 Mock Morning? I rly dont know how to upload pictures… Essentially, i have copied word for word the solution from CFAI: In the current rate method, the share capital and opening retained earnings use the rate at the date of acquisition (1 July), and the change in retained earnings is equal to the net earnings (loss) for the period at the average rate (July–December).
I have no idea what this means after reading 10 times. Can you rephrase it differently?
First we are talking about retained earnings, a balance sheet position. Method is current rate method.
As I stated above, once derived from P/L by applied average rate (upon mentioned method), current earnings in next period becomes retained earnings. Who works in preparing FS, he knows that re-booking is required from current period to retained earnings account. Once re-booked at new BS equity position, for further translation procedure, current rate at BS date should be applied. Ex. at 01.01. USD/EUR is 1,2, at 31.12. USD/EUR is 1,4 and one of those currencies is reporting currency, another is local (entity) currency.
Let’s see what IFRS says:
Summary of SIC-30
SIC-30 addresses how an enterprise translates items in its financial statements from a measurement currency to a presentation currency. SIC-30 provides that when the measurement currency is not the currency of a hyperinflationary economy, the requirements of SIC-19.9 should be applied as follows:
assets and liabilities for all balance sheets presented (including comparatives) are translated at the closing rate existing at the date of each balance sheet presented income and expense items are translated at the exchange rates existing at the dates of the transactions equity items (other than the net profit or loss for the period that is included in retained earnings) are translated at the closing rate existing at the date of each balance sheet presented all exchange differences resulting from translation should be recognised directly in equity.
http://www.iasplus.com/en/standards/sic/sic-30
Let’s say what says US GAAP
If the functional currency is the home currency, the current method is used. The current method translates all assets and liabilities at the current spot rate at the date of translation. Equity items, other than retained earnings, are translated at the spot rates in effect on each related transaction date (specific identification). Retained earnings are translated at the weighted-average rate for the relevant year, with the exception of any components that are identifiable with specific dates, in which case the spot rates for those dates are used. Income statement items are translated at the average rate for the period, except where specific identification is practicable. The resulting adjustment is not recognized in current earnings, but rather as a component of other comprehensive income. -
See more at: http://www.eisneramper.com/Foreign-Currency-Translation-FAS-52.aspx#sthash.V6FIkiGi.dpuf
OK, Magician, regarding US GAAP, you may be right but USGAAP are standards which are not reality for the most of the world
Seriously: have the courtesy to write real words. Not “u”. Not “haf”. Not “rly”.
You’re asking for help. Show some respect to those whose help you seek.
Hi S2000magician, apologies for that. Typing like this in the chatroom/ forum/ online platform is very common in my country. Wasn’t mean to be disrespectful at all.
Definitely appreciate everyone’s help in this forum 
Back to the topic - may I know if you have any advice on getting the ‘beginning’ retained earnings’ value? The answer to 2015 Mock qn 22 confuses me a great deal. The eg. qns in Kaplan just provide you with the beginning figures.