Exam 9: Reporting Foreign Operations

Liverpool Company operates retail stores in Canada and an exporting business in London that specializes in buying and selling British tweeds. The London subsidiary, which was acquired on January 1, 1986, provided the following financial statements in pounds sterling to the Canadian parent company. $\text { LIVERPOOL COMPANY, London Branch }$ $\text {Statement of Comprehensive Income}$ $\text { Year Ended December 31. 20X5}$ Sales £2,300,000 Cost of goods sold (1,200,000) Depreciation expense (300,000) Other expenses Comprehensive income £ $\text { LIVERPOOL COMPANY, Landan Branch }$ Statement of Changes in Equity-Partial-Retained Earnings section $\text { Year Ended Derember } 31,20X5$ Retained earnings-January 1 £850,000 Comprehensive income for the year 500,000 Less: Dividends declared and paid, December 31 Retained earnings-December 31 £ $\text { LIVERPOOL COMPANY, London Branch }$ $\text {Statement of Financial Position}$ $\text {December 31,20X5 }$ Assets 20X5 20X4 Cash and receivables £1,150,000 £520,000 Merchandise inventory 450,000 380,000 Property, plant, and equipment Total £ £ Current liabilities £700,000 £600,000 Capital stock 1,200,000 1,200,000 Retained earnings 2,000,000 2,000,000 Total Liverpool Company was incorporated on January 1, 1984, at which time an amount of property, plant, and equipment with a present (December 31, 20X5)net book value of £3,000,000 was purchased. Additional equipment was purchased December 31, 20X4 (20% of depreciation expense relates to this new equipment). The long-term notes were issued, to replace financing provided by the parent, on January 1, 20X4. Direct exchange rates for the pound sterling are: January 1, 1984 £\ 1=\ 1.9180 January 1, 1986 1.8365 January 1,20X4 1.6000 Average for quarter 4,20X4 1.5612 December 31,20X4 / January 1, 20X5 1.5426 December 31,20X5 1.4730 Average for 20X5 1.5093 Average for quarter 4,20X5 1.4950 - The January 1, 20X5 retained earnings balance of the London Branch of the Liverpool Company correctly translated to Canadian dollars was $1,783,774. The beginning inventory of £380,000 was acquired during the last quarter of 20X4 and the ending inventory was acquired during the last quarter of 20X5. Sales and purchases were made, and other expenses were incurred, evenly throughout the year. Required: Translate the statement of comprehensive income and statement of changes in equity-partial-retained earnings section of Liverpool Company for the year ending December 31, 20X5, into dollars, assuming that the temporal method is appropriate.

What is the impact of currency realignment on the earnings ability of a foreign operation known as?

Which of the following statements about non-monetary assets is true?

For private enterprises that use the current-rate method, how does reporting under Accounting Standards for Private Enterprises (ASPE)differ from reporting under IFRS?