Sydney Corporation, an Australian based multinational, borrowed 10,000,000 euros from a German lender at the beginning of the calendar year when the exchange rate was EUR 60 AUD1 Before repaying this oneyear loan, Sydney Corporation learns that the Australian dollar has depreciated to EUR 55 AUD1 I...

a If the euro is the German subsidiarys functional currency its ...

Sydney Corporation, an Australian-based multinational, borrowed 10,000,000 euros from a German lender at the beginning of the

Question:

Sydney an Australian-based multinational, borrowed 10,000,000 euros from a German lender at the beginning of the calendar year when the was EUR.60 = AUD1. Before repaying this oneyear loan, Sydney learns that the Australian dollar has depreciated to EUR.55 = AUD1. It also discovers that its Frankfurt subsidiary has an exposed net asset position of EUR30,000,000, which will produce a translation gain upon consolidation. What is the exchange gain or loss that will be reported in consolidated income if
a. The euro is the foreign operation’s functional currency?
b. The Australian dollar is the foreign operation’s functional currency?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...