Reading 21 - Hyperinflation - confusing explanation

CFA Level II FRA
#1

Please see snippet below from Reading 21

What does the reference “despite the use of the temporal method” mean in the explanation below? It think the temporal method always results in an adjustment to Net Income. What am I missing? What are the authors trying to indicate is so different in this case??

Reading 21 Snippet:

SFAS 52 does not allow restatement for inflation, but instead requires the temporal method to translate financial statements kept in a highly inflationary currency. However, despite the use of the temporal method , the resulting translation adjustment is included as a gain or loss in determining net income.

(Institute 237)

Institute, CFA. Level II 2013 Volume 2 Financial Reporting and Analysis. John Wiley & Sons (P&T), 7/9/2012. .

#2

hmmm…not sure.

The current method has a ‘cumulative translation adjustment’ which is a BS input. The temporal method as a ‘remeasurement’ which is an IS input. Whilst these are very similar, they are called by different names, so it appears rather confusing for the CFAI to say the temporal method has a translation adjustment. Also, as you have pointed out, they also say ’ despite’ which adds to the confusion.

Perhaps they have made a mistake and there is an errata…have you looked for one?

#3

Thanks! I checked for an errata but didn’t find one. Probably not a huge deal… but if anyone knows otherwise, please chime in.