Top PDF Paper on the Accounting Advisory Forum - Foreign currency translation

Paper on the Accounting Advisory Forum - Foreign currency translation

Paper on the Accounting Advisory Forum - Foreign currency translation

19-21 Other aspects 22-25 Incorporation of integrated foreign branches into the annual accounts 26 CONSOLIDATED ACCOUNTS 27-37 Translation of annual accounts of integrated foreign operat[r]

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Paper on the Accounting Advisory Forum - Accounting for lease contracts

Paper on the Accounting Advisory Forum - Accounting for lease contracts

Operatin~ Finance leases lease By lessor as an asset Asset as annuity-loan By lessee in the notes Assets capitalised in balance sheet at fair value purchase price calculation or value on[r]

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Foreign Currency Translation under U.S. GAAP-A Simplified Example

Foreign Currency Translation under U.S. GAAP-A Simplified Example

Accounting for currency exchange and currency translation comes about when a company has a branch, joint venture or a subsidiary that prepares its’ financial statements in a currency other than the currency of the parent company. For purposes of consolidated financial statements the currency must be restated to the currency used by the parent company in preparing the consolidated financial statements. This paper will discuss the key elements and processes using examples of possible ways that the various elements could be addressed. The key elements and processes include: determination of the functional currency, identification of appropriate exchange rates to be used and where those exchange rates might be found, use of either the current rate or temporal method for calculating currency translation adjustments and finally proper disclosure of the currency adjustment. These items will be discussed through the use of a hypothetical case study.
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Pricing Foreign Currency and Cross-Currency Options Under GARCH

Pricing Foreign Currency and Cross-Currency Options Under GARCH

Before reporting the numerical results, some general discussions are in order. In our model, the unconditional return for both the exchange rate and the stock index is leptokurtic under the data generating measure P. Under the locally risk-neutralized measure Q d , the returns continue to be leptokurtic, and the locally risk-neutralized return distributions have a negative (positive) skewness if the sum of the unit risk premium and the asymmetry parameter is positive (negative). The extent of skewness depends on the magnitude of the sum. Leptokurtosis tends to make an out-of-the-money or in-the-money option worth more than its constant-variance counterpart if there is no skewness under Q d . Positive skewness under measure Q d , however, tends to cause the constant-volatility model to underprice out-of-the-money call options. These two factors together determine the properties of the GARCH-based currency option pricing model.
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Derivative Instruments and Islamic Finance: Some Thoughts for a Reconsideration

Derivative Instruments and Islamic Finance: Some Thoughts for a Reconsideration

derivative markets to manage or reduce risk. They are typically businesses that use derivatives to offset exposures resulting from their business activities. The second category of players - arbitrageurs use derivatives to engage in arbitrage. Arbitrage is the process of trying to take advantage of price differentials between markets. Arbitrageurs closely follow quoted prices of the same asset/instruments in different markets looking for price divergences. Should the prices be divergent enough to make profits, they would buy on the market with the lower price and sell on the market where the quoted price is higher. Since most financial markets are integrated by computer networks arbitrage activity boils down to hitting the right keystrokes. As arbitrage opportunities can quickly disappear, quick action is needed. Thus, institutions (commercial banks, investment banks, currency dealers etc.) that engage in arbitrage activity invest huge amounts of money in global computer networks and telecommunication equipment.
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Exchange rate risk and the equity performance of financial intermediaries

Exchange rate risk and the equity performance of financial intermediaries

The sample period starts on January 1, 2003 and finishes on March 31, 2011 providing 1,924 daily observations after accounting for non-trading days. The focus is on the U.S., U.K. and Japanese banking/insurance industries. Equally weighted portfolios are constructed for the banking and insurance firms. These firms are later split to form size portfolios when enough companies are available (e.g. Japanese and U.S. banks). Given our annual rebalancing, institutions in the top quartile comprise the large firms while the remaining institutions are categorized as small. Furthermore, for each country the market index and long-term government bond yields are collected, while trade weighted currency price indices for the Japanese Yen (JPY), British Pound (GBP) and the US Dollar (USD) are obtained from the Bank of England (BoE). These variables form the set of exogenous risk factors. All data information is provided by Thompson Reuters. Table 1 provides some descriptive statistics for our sample.
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The long-run determination of the real exchange rate. Evidence from an intertemporal modelling framework using the dollar-pound exchange rate

The long-run determination of the real exchange rate. Evidence from an intertemporal modelling framework using the dollar-pound exchange rate

Acknowledgements We are extremely grateful to George Chortareas, Jose Olmo, Gabriel Montes-Rojas, Sushanta Mallick, William Pouliot, Roy Bailey, Keith Cuthbertson and Joscha Beckmann and the participants at the European Economics and Finance Society 15th Annual Conference in Amsterdam for many useful comments and suggestions. We are also particularly heavily indebted to two anonymous referees for their extensive comments that led to significant improvements in the paper. Any errors and omissions remain those of the authors.

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Long-run determination of the nominal exchange rate in the presence of national debts: Evidence from the yen-dollar exchange rate

Long-run determination of the nominal exchange rate in the presence of national debts: Evidence from the yen-dollar exchange rate

of real money balances is intended to represent the role of money used in transactions, without addressing explicitly a formal transaction mechanism. This can distinguish money from other assets like interest bearing bonds or stocks. 3 We extentd Kim’s (2000) and Kia’s (2006) specification by introducing variable 𝜅 𝑡 into the utility function in order to reflect potential risk associated with holding domestic real money balances relative to foreign real money balances. In the current analysis such risk is assumed to be associated with the relative government debt ratio as a percentage of GDP 4 . The representative agent is assumed to maximize the present value of lifetime utility given by:
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The Role of National Debts in the Determination of the Yen-Dollar Exchange Rate

The Role of National Debts in the Determination of the Yen-Dollar Exchange Rate

two country model with optimizing agents where wealth is optimally allocated in an asset choice set that explicitly includes investment in an array of financial assets including domestic and foreign real money balances, domestic and foreign bonds and domestic and foreign stocks. Within this framework, the model also contributes by looking at the risk of holding relative real money balances in the optimization process, after incorporating into the analysis the relative government debt to GDP ratio. We argue that the risk associated with increasing national debts can significantly affect the investors’ decisions to optimally allocate their wealth among different assets in an open economy framework. The predictions of our theoretical model are tested empirically using data from Japan (treated as the domestic economy) and the USA (treated as the foreign economy). Japan and the USA have high trade and financial relationships with each other and both have high and growing national debt to GDP ratios.
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Determinants of Currency Depreciation in Pakistan

Determinants of Currency Depreciation in Pakistan

The loss of value of currency of any country with respect to foreign currencies like US $ is called Currency depreciation. Since 2008, Pakistani Rupee depreciates extensively which created many problems and hinders economic growth of country. The main reason behind this sharp decline is bad economic condition, terrorism, law and order situation, decrease in foreign portfolio investment and bad performance of stock market in Pakistan. The purpose of this research study is to analyze impact of terrorism, portfolio investment and stock market return on currency depreciation. This study uses monthly secondary data from 2003 to 2012. Both descriptive and inferential statistics are used to analyze data. The result of ADF test show that all series are stationary at level and first difference with and without trend. Correlation is used to check relationship among variables and Ordinary Least Squares (OLS) Methods is used to test impact of independent variables (terrorism, portfolio investment and stock market return) on dependent variable i.e. currency depreciation. Correlations of currency depreciation are 30%, -13% and -29% with terrorism, portfolio investment and stock market return respectively. The results suggest that terrorism has positive contributions in currency depreciation while portfolio investment and stock market return has negative impact of currency depreciation during 2003-2012.
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The Forum on Patronage and Pluralism in the Primary Sector : Report of the Forum’s Advisory Group

The Forum on Patronage and Pluralism in the Primary Sector : Report of the Forum’s Advisory Group

The patronage of national schools is an issue that is deeply rooted in Irish educational and political history. The Irish national school system is 180 years in operation in 2011, and the patronage of schools was a contentious issue from its inception in 1831. Participants at the open working sessions of the Forum, as well as other commentators, have rightly stressed the importance of parental viewpoints on the issues relating to patronage and possible changes to it. It was also emphasised, however, that many parents do not have a good understanding of school patronage and tended to focus more on the quality of the schools in their locality. While this preoccupation is understandable, the future pattern of patronage of primary schools is an important matter for Irish society. Accordingly, in the interest of informed debate, participants are entitled to have an understanding of how school patronage evolved as it did, what changes have been occurring in the recent past, and the relevant constitutional and legal context in which the debate is taking place. As Dympna Glendenning remarks, regarding the current debate, “Parents need to be fully informed of all aspects of school life but particularly of those elements of education which pertain to ideology and religion which are primarily within their constitutional remit”. 5 Hence, this opening section of the Report aims to give an overview of these features, against which the contemporary debate can be best understood.
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Choosing the Currency Structure of Foreign currency Debt: a Review of Policy Approaches

Choosing the Currency Structure of Foreign currency Debt: a Review of Policy Approaches

This paper overviewed approaches policy makers could employ to determine the most suitable currency structure for their foreign-currency debt in light of the constraints and incentives that make sovereigns issue debt in foreign currency. These include, most notably, rationing of the sovereigns in their domestic markets, opportunistic debt issuance aimed at decreasing the cost of debt, and exploiting the hedging attributes of foreign-currency debt. The opportunistic issuance of foreign-currency debt could be driven by the prevailing cost-minimizing objective over the risk-minimizing one. The combination of risk- and cost-minimizing goals could be expressed in a formal objective function of the debt managers. The objective function is optimized with respect to the constraints originating in the structure and functioning of the domestic macroeconomy and the initial conditions, including the current structure of the government liability portfolio, in order to derive a strategic benchmark portfolio as the intermediate target for the debt management policy (here, a parallel to inflation targeting could be drawn). The objective functions of the reviewed policy approaches differ according to their risk- or cost-minimizing focus. Even by itself this introduces arbitrariness in the optimized currency structure of the strategic benchmarks. In addition, different approaches model the macroeconomic constraints and initial conditions using a different degree of aggregation and complexity, including non-linearities. Nevertheless, the crucial parameters driving the solution for the strategic benchmarks for foreign-currency debt are the covariances of macrovariables,
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Economic Surgery: Money Value Transfer and Storage

Economic Surgery: Money Value Transfer and Storage

This paper tries to prove that countries can do either without debt completely or at least to a very negligible level and one way to do that is the implementation of MVTS. Like any other thing in life that has advantages and disadvantages MVTS may also have such but electronic money system as highlighted in the work of Andresen (2013) is a potent tool against any possible side effects of MVTS. After all the various monies out there are all printed thus with the knowledge of MVTS developing economies can take advantage of it to create paths to economic freedom and prosperity. Debt is bad and this paper tries to prove that developing countries can do without it or reduce it to an almost nonexistent level if only they implement the MVTS system. The term economic surgery is a misnomer. Its meaning is not restricted only to this paper alone. Actually every economic solution is an economic surgery but special attention is being given to this word in this paper because it is believed that the application of MVTS system will be an addition to the various existing economic surgeries.
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20101025-UKASBReportofNSSSep10-Final.pdf

20101025-UKASBReportofNSSSep10-Final.pdf

5.2 The aim of the project, which was still work-in-progress, was to develop proposals for a new accounting standard that would replace the current standard IAS 12 ‘Income Taxes’. Many regarded IAS 12 as complex and difficult to apply. The usefulness of information presented in accordance with IAS 12 had also been questioned. A back to basics approach had been adopted for the project, with the aim of arriving at a solution that was both conceptually sound and practical enough to be implemented at reasonable cost to provide information that was useful to readers of financial statements.
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Government Borrowing, Bank Liquidity and Interest Rates  Quarterly Economic Commentary Special Article, September 1980

Government Borrowing, Bank Liquidity and Interest Rates Quarterly Economic Commentary Special Article, September 1980

of domestic foreign currency deposits which were financing increases in foreign currency lending within the state, greater use of the Central Bank's short term credit facility to the non[r]

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Impact of Exchange Rate Movements on Indian Firm Performance

Impact of Exchange Rate Movements on Indian Firm Performance

An appreciation of the home currency results in a lower the home-currency price of internationally-priced inputs, so production costs fall and industry profitability rises. Similarly, a depreciation increases the home currency price of these inputs, increasing costs and decreasing profitability. Finally, exchange rate changes directly affect the value of foreign denominated assets through the translation of values from one currency to another. For example, firms with foreign investments that have current and future cash flows denominated in foreign currency and the home currency value depend on the exchange rate. In most cases, a depreciation of the home currency increases the value of industries with net foreign denominated assets, while an appreciation decreases the value of these industries.
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Foreign banks and foreign currency lending in emerging Europe

Foreign banks and foreign currency lending in emerging Europe

It is difficult to establish a causal relationship between bank ownership or funding and FX lending from our cross-sectional results alone. First, the observed impact of customer funding may be driven by omitted bank characteristics, e.g. customers with income in FX, which affect both FX deposits and FX lending. Second, the observed impact of (long-term) macroeconomic instability may be driven by unobserved country characteristics, e.g. institutional weaknesses which may be correlated with both weak macroeconomic policies and the absence of (exporting) firms which demand FX loans. Third, the observed relation between foreign bank ownership and FX lending to corporate clients may be due to reverse causality. Foreign banks may be more likely to enter countries where there are more clients with a demand for financial services in foreign currency, i.e. countries with more export-oriented firms or a real estate market that is denominated in euro. Foreign institutions may also be more likely to take over domestic banks that already have a clientele that use financial services in foreign currency. 8 In this section, we try to mitigate concerns about omitted variables and reverse causality by looking at changes in banks’ FX lending between 2001 and 2004, controlling for time-invariant bank characteristics and changes in the macroeconomic environment.
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An Overview of Foreign Currency Exposure

An Overview of Foreign Currency Exposure

One reason that a company should hedge is to shield the “domestic value of the investment”. In this case, the value refers to the “accounting value as the balance date,” hence not the economic value of an asset. Basically it reflects the price which was paid for the asset that was adjusted for an “annual change in the exchange rate”. When hedging financial risks, it comes to mind that it means to protect the earnings and economic value of a company. However, in terms of an accounting valuation, it can’t be hedged. Hedge which affects the cash flow of a company without protection being provided is not protecting the firm’s economic value. The main purpose of hedging is to protect the “net investment from negative revaluations”. It is absolutely common that negative revaluations will be adjusted by positive revaluations in the long run. Another theory is that translation hedge also is capable of protecting the value of an “asset for future realization”. However, there are two major complications associated with this debate. First, it is said that very few companies have “future realization date” when it comes to their foreign assets. Second, the accounting value or historical cost does not affect the changes pertaining to economic company related conditions. Due to this reason, the accounting valuation has little similarity to the realizable value and the hedge is shielding a valuation which does not affect the “evolving economic worth of an investment”. Another foundation for hedging net foreign assets is that it disregards the effect of “exchange rate movements on share prices”.
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Harmony Iraqi Accounting Rules With International Accounting Standards of the Change in Currency Exchange Rates

Harmony Iraqi Accounting Rules With International Accounting Standards of the Change in Currency Exchange Rates

Can standards be defined as models or general guidance lead to guide and streamline the process practices in Accounting and Auditing (LAOnojah, 2014: 7) The accounting standards as written statements issued by the device or official accounting regulatory body the mother of a professional dealing with the organization of fashion style to identify and measure the width of element Set of elements of financial statements economic unit for the purposes of identifying business data and financial center of that unit results appropriate degree of accuracy and objectivity (Ann Tarca, 2013: 10) and accounting standard refers to the extension of accounting rules due to accountants concerned to support the reasoning and question their judgment and the importance of accounting standards generally through: (Bernard Raffournier, 2010: 25)
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The long-run determination of the real exchange rate. Evidence from an intertemporal modelling framework using the dollar-pound exchange rate

The long-run determination of the real exchange rate. Evidence from an intertemporal modelling framework using the dollar-pound exchange rate

This paper contributes to the literature by proposing an alternative approach towards the determination of the real exchange rate in the long run. This is of a particular importance for the derivation of the equilibrium real exchange rate and the measurement of real exchange rate misalignments. As opposed to current literature, which is heavily based on various extensions of the balance of payments equilibrium real exchange rate equation, the proposed theoretical framework contributes towards the portfolio balance approach to the determination of the real exchange rate in the long run by constructing a two country model with optimizing agents where wealth is assumed to be allocated optimally in an asset choice set that includes explicitly investment in an array of financial assets. As opposed to other literature 3 the model specification introduced in this paper allows the construction of explicit equations for both domestic and foreign real money balances, which can further be utilized in order to generate a
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