Page 62 - FINAL CFA II SLIDES JUNE 2019 DAY 5.2

LOS 16.e: Calculate the translation effects and evaluate the READING 16: MULTINATIONAL OPERATIONS
translation of a subsidiary’s balance sheet and income
statement into the parent company’s presentation currency.
MODULE 16.5: EXAMPLE

The following exchange rates between the U.S. dollar and the loca were observed:
•December 31, 2014: $0.50 = LC1.00.
•December 31, 2015: $0.4545 = LC1.00.
•Average for 2015: $0.4762 = LC1.00.
•Historical rate for equity: $0.50 = LC1.00.
•Historical rate for PP&E and depreciation: $0.4881 = LC1.00.
•Historical rate for accumulated depreciation = $0.4896 = LC1.00.
•Historical rate for beginning and ending inventory $0.52/LC and $0.456/LC
respectively.
•Purchases were made evenly throughout the year.
The majority of Vibrant’s operational, financial, and investment decisions are made
locally in Martonia, although Vibrant does rely on FlexCo for information
technology expertise.
Use the appropriate method to translate Vibrant’s 2015 balance sheet and income
statement into U.S. dollars.