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101 Concepts for the Level I Exam

Essential Concept 27: Comparison of Current Rate and Temporal Methods

Current Rate Method Temporal Method
Monetary assets and liabilities Current rate Current rate
Non-monetary assets and liabilities measured at current value Current rate Current rate
Non-monetary assets and liabilities measured at historical cost Current rate Historical rates
Equity (other than retrained earnings) Historical rates Historical rates
Equity (retained earnings) Beginning balance plus translated net income less dividends translated at historical rate
Revenue Average rate Average rate
Most expenses Average rate Average rate
Expenses related to assets translated at historical exchange rate Average rate Historical rates
Treatment of the translation adjustment in the parent’s consolidated financial statements Accumulated as a separate component of equity Included as gain or loss in net income

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