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June 14, 2010

Comments

John Brozovsky

If there is that much inflation in the subsidiary to really make a difference then it would be considered highly inflationary and could not be translated. It would have to be remeasured with the opposite effect actually going through the income statement negating the first effect. This does not effect the potential problem of black market/official rates but does affect the income/oci issue.

John

John: The example I provided is straight from the ASU, and Venezuela has not yet been classified "highly inflationary." The ASU provides that once Venezuela becomes highly inflationary, then the treatment you describe will be applied. Until then, and for all other countries with dual currency environmnts, cash in the bank is not cash on the balance sheet.

Independent Accountant

Tom:
I'll think about it, but this is pretty ugly.

IA

Independent Accountant

Tom:
You are correct. Venezuela is not considered a highly inflationary country.

IA

PIYA

Tom,

Appears the following resolution to an apparently extraneous situation should not be disregarded in your analysis (oh, this was 12yrs prior to your complaint):

The Task Force noted that inclusion of the effects of inflation in the line items comprising the three major categories of the cash flow statement may make the presentation less meaningful and possibly misleading. For example, the financing activities section may depict reductions of foreign-currency denominated debt because of the recasting of prior balance sheet amounts for inflation, even though no cash repayment has occurred. In some cases, these effects may permeate the statement of cash flows. Historically, these effects have only been partially captured in the US GAAP reconciling disclosures.

The issue is whether registrants should be required to prepare price-level adjusted cash flow statements in a manner that comprehensively segregates the effects of inflation/currency devaluation from the cash flows from operating, investing and financing activities. The Task Force noted that presentation of a "fourth caption" that captures these effects has been adopted in several countries (Chile, Columbia).

The staff concluded that registrants should be required to prepare price-level adjusted cash flow statements in a manner that comprehensively segregates the effects of inflation from the cash flows from operating, investing and financing activities.

However... very interesting,

PIYA

Michael

Venezuela is highly inflationary for accounting purposes, most companies begain applying the highly inflationary economy foreign currency rules as of 1/1/10:

http://www.cfodirect.pwc.com/CFODirectWeb/Controller.jpf;jsessionid=L5xpn1zml4tRsQstJJdhMKNPNh4XQ0qfQsp2JS7nQ5GLGP0bhyzp!176045223?ContentCode=AALN-7ZVQHZ&ContentType=Content

Franclei Contabilidade

Sorocaba Contabilidade - We support all activities directed to the development of Accounting Science in Brasil

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