Contoh ilustrasi

Translasi dan
Remeasurement
 Illustration 2:
Translation example
On 31 December 20x3 Alpha Corporation acquired the entire share capital
of Beta Company, a foreign company whose currency is the FC. At the date
of acquisition, Beta’s Balance Sheet was as follows:
Beta Company
Balance sheet at 31.12.20x3
Assets FC
Plant & equipment 200,000
Inventories 100,000
Account receivable 150,000
Account payable (80,000)
Net assets 370,000

Share capital 200,000

Retained earnings 170,000
Equity 370,000

Tan & Lee Chapter 7 © 2009 2

 Illustration 2:
Translation example
Beta’s financial statements for the year ended 31 December 20x4 are as
follows:
Income statement
  FC
Sales 800,000
Cost of goods sold (470,000)
Gross profit 330,000
Depreciation (25,000)
Operating expenses (200,000)
Profit before tax 105,000
Taxation (20,000)
Profit after tax 85,000
Dividends paid (25,000)
Retained profit for year 60,000
Retained profit at 1 Jan 170,000
Retained profit at 31 Dec 230,000

Tan & Lee Chapter 7 © 2009 3

 Illustration 2:
Translation example
Beta Company
Balance sheet at 31.12.20x4
 
Assets:  
Plant and equipment 225,000
Inventories 120,000
Accounts receivable 200,000
Cash 5,000
Accounts payable (120,000)
Net assets 430,000

Share capital 200,000

Retained earnings 230,000
  430,000

Tan & Lee Chapter 7 © 2009 4

 Illustration 2:
Translation example
Additional information:
1. Assets are depreciated using the straight line method at the rate of 10%. During 20x4, equipment costing
FC50,000 was purchased. A full year’s depreciation is recorded in the year of purchase.

2 Relevant exchange rates are as follows:

1FC =
At 31.12.20x3 1.50
At date of purchase of equipment 1.48
At date of payment of dividends 1.40
Closing inventories (20x4) purchased 1.38
Equipment purchased 1.45
Average rate for 20x4 1.42
At 31.12.20x4 1.35

Tan & Lee Chapter 7 © 2009 5

 Illustration 2:
Translation example
Required:
(a) Translate the financial statements of Beta Company into dollars assuming that Beta’s functional
currency is the FC

(b) Remeasure the financial statements of Beta Company into dollars assuming that Beta’s functional
currency is the dollar

Tan & Lee Chapter 7 © 2009 6

 Illustration 2:
Translation example
Translated Income Statement (Closing Rate method)
  FC Rate S$
Sales 800,000 1.42 1,136,000
COGS (470,000) 1.42 (667,400)
Gross profit 330,000   468,600
Depreciation (25,000) 1.42 (35,500)
Operating expenses (200,000) 1.42 (284,000)
Profit before tax 105,000 1.42 149,100
Taxation (20,000) 1.42 (28,400)
Profit after tax 85,000 1.42 120,700
Dividends paid (25,000) 1.4 (35,000)
Retained profit for year 60,000   85,700
Retained profit at 1 Jan 170,000 1.5* 255,000
* Rate at
acquisition
Retained profit at 31 Dec 230,000   340,700
date

Tan & Lee Chapter 7 © 2009 7

 Illustration 2:
Translation example
Beta Company
Balance sheet at 31.12.20x4
Assets FC Rate S$
Plant and equipment 225,000 1.35 303,750
Inventories 120,000 1.35 162,000
Accounts receivable 200,000 1.35 270,000
Cash 5,000 1.35 6,750
Accounts payable (120,000) 1.35 (162,000)
Net assets 430,000 1.35 580,500

Share capital 200,000 1.5 300,000

Retained earnings 230,000 From I/S 340,700
Translation reserves _______ Bal. fig. (60,200)
  430,000   580,500
Tan & Lee Chapter 7 © 2009 8
 Illustration 2:
Translation example
Movement in net exposed Items FC Rate S$
Net assets on 1 Jan 370,000 1.50 555,000
Increase in net assets:
Net profit after tax 85,000 1.42 120,700
Decrease in net assets:
Dividends paid (25,000) 1.40 (35,000)
640,700 (A)
Net assets on 31 Dec 430,000 1.35 580,500 (B)
Translation difference for the year (B – A) (60,200)

Tan & Lee Chapter 7 © 2009 9

Illustration 2:
Translation example
Remeasured Income Statement (Functional currency is S$)
FC Rate S$
Sales 800,000 1.42 1,136,000
COGS (470,000) Note (a) (680,200)
Gross profit 330,000 455,800
Depreciation (25,000) Note (b) (37,250)
Operating expenses (200,000) 1.42 (284,000)
Remeasurement loss ________ Note (c) (10,550)
Profit before tax 105,000 124,000
Taxation (20,000) 1.42 (28,400)
Profit after tax 85,000 95,600
Dividends paid (25,000) 1.40 (35,000)
Retained profit for year 60,000 60,600
Retained profit at 1 Jan 170,000 1.50 (Acq date) 255,000
Retained profit at 31 Dec 230,000   315,600
10
Tan & Lee Chapter 7 © 2009
 Illustration 2:
Translation example
Note (a) – Cost of
goods sold (COGS)      
  FC Rate $
Opening inventories 100,000 1.5 150,000
Purchases 490,000 1.42 695,800
Closing inventories (120,000) 1.38 (165,600)
COGS 470,000   680,200

Note (b) – Depreciation expense    

  FC Rate S$
Existing equipment 20,000* 1.5 30,000
New equipment (2004) 5,000# 1.45 7,250
  25,000 37,250
*S$200,000 ÷ 10
years  
# $50,000 ÷ 10 years      
Tan & Lee Chapter 7 © 2009 11
 Illustration 2:
Translation example
Note (c): Remeasurement loss
Movement in net exposed items FC Rate S$
Net monetary assets, 1 Jan 70,0001 1.50 105,000
∆ in monetary assets/liabilities:
Sale 800,000 1.42 1,136,000
Purchase of equipment (50,000) 1.45 (72,500)
Purchases (490,000) 1.42 (695,800)
Operating expenses (200,000) 1.42 (284,000)
Taxation (20,000) 1.42 (28,400)
Dividends paid (25,000) 1.40 (35,000)
125,300 (A)
Net monetary assets, 31 Dec 85,0002 1.35 114,750 (B)
Remeasurement loss (B-A) (10,550)

Tan & Lee Chapter 7 © 2009 12

 Illustration 2:
Translation example
1. Opening exposed monetary items:
FC
Accounts receivable 150,000
Accounts payable (80,000)
Net monetary assets, 1 Jan 70,000

2. Closing exposed monetary items:

Accounts receivable 200,000
Cash 5,000
Accounts payable (120,000)
Net monetary assets, 31 Dec 85,000

Tan & Lee Chapter 7 © 2009 13

 Illustration 2:
Translation example
Beta Company
Balance sheet at 31.12.20x4
Assets FC Rate $
Plant/Equipment 225,000 Note (d) 335,250
Inventories 120,000 1.38 165,600
Accounts receivables 200,000 1.35 270,000
Cash 5,000 1.35 6,750
Accounts payables (120,000) 1.35 (162,000)
Net assets 430,000 1.35 615,600
 
Share capital 200,000 1.5 300,000
Retained earnings 230,000 From I/S 315,600
  430,000   615,600

Tan & Lee Chapter 7 © 2009 14

 Illustration 2:
Translation example
Note (d) - Equipment      
Existing equipment: FC Rate S$
Cost 200,000  
Accumulated depreciation (20,000)  
Net carrying value 180,000 1.5 270,000
   
New equipment  
Cost 50,000  
Accumulated depreciation (5,000)  
Net carrying value 45,000 1.45 65,250
Total 225,000   335,250

Tan & Lee Chapter 7 © 2009 15