On December 18, 2020, Stephanie Corporation acquired 100 percent of a Swiss company for
4.012 million Swiss francs (CHF), which is indicative of book and fair value. At the acquisition
date, the exchange rate was $1.00 = CHF 1. On December 18, 2020, the book and fair values of
the subsidiarys assets and liabilities were as follows:
Cash CHF 812,000
Inventory 1,312,000
Property, plant, and equipment 4,012,000
Notes payable (2,124,000 )
Stephanie prepares consolidated financial statements on December 31, 2020. By that date, the
Swiss franc has appreciated to $1.10 = CHF 1. Because of the year-end holidays, no transactions
took place prior to consolidation.
Determine the translation adjustment to be reported on Stephanies December 31, 2020,
consolidated balance sheet, assuming that the Swiss franc is the Swiss subsidiarys functional
currency. What is the economic relevance of this translation adjustment?
Determine the remeasurement gain or loss to be reported in Stephanies 2020 consolidated net
income, assuming that the U.S. dollar is the functional currency. What is the economic relevance
of this remeasurement gain or loss?
a) Translation adjustment :______ : $ ?
b) ____________ $_____?.
On December 18, 2020, Stephanie Corporation acquired 100 percent of .pdf
1. On December 18, 2020, Stephanie Corporation acquired 100 percent of a Swiss company for
4.012 million Swiss francs (CHF), which is indicative of book and fair value. At the acquisition
date, the exchange rate was $1.00 = CHF 1. On December 18, 2020, the book and fair values of
the subsidiarys assets and liabilities were as follows:
Cash CHF 812,000
Inventory 1,312,000
Property, plant, and equipment 4,012,000
Notes payable (2,124,000 )
Stephanie prepares consolidated financial statements on December 31, 2020. By that date, the
Swiss franc has appreciated to $1.10 = CHF 1. Because of the year-end holidays, no transactions
took place prior to consolidation.
Determine the translation adjustment to be reported on Stephanies December 31, 2020,
consolidated balance sheet, assuming that the Swiss franc is the Swiss subsidiarys functional
currency. What is the economic relevance of this translation adjustment?
Determine the remeasurement gain or loss to be reported in Stephanies 2020 consolidated net
income, assuming that the U.S. dollar is the functional currency. What is the economic relevance
of this remeasurement gain or loss?
a) Translation adjustment :______ : $ ?
b) ____________ $_____?
