Temporal

Assignment: temporal method You work for a US company that has a subsidiary in Euro You work for an American company that has a branch in Italy pe. The functional currency of the subsidiary is Euro. The company's total assets and total liabilities as at 31 December 2017 are EUR 200 million and EUR 140 million. Common stock is worth EUR 20 million (equivalent to USD 25 million when it was raised) and the rest represents retained earnings. USD equivalent balance of retained earnings was USD 32 million last year. Net income for the year is EUR 15 million which is earned equally throughout the year. Average exchange rate that prevailed over the year was 0.82/$ and the closing exchange rate is 0.85/$. Note: 50% of assets and liabilities are non-monetary items which were acquired when the exchange rate was 0.80/$. Item Euro in millions Exchange USD in Rate millions Calculation Monetary assets 100 Non-monetary assets 100 Total assets 200 Monetary liabilities 70 Non-monetary liabilities 70 Total liabilities 140 Common Stock 20 Retained Earnings 40 Total liabilities plus equity 200 Net income before FX gain or loss 15 FX gain or loss Net income after FX gain or loss