In: Accounting
Darvish Company is a European subsidiary of Cubbie Corporation, a U.S. company. Darvish had the following balance sheet at December 31, 20X1:
(in millions of euros) | |||
Cash | € | 50 | |
Accounts receivable | 75 | ||
Inventory | 120 | ||
Fixed assets, net of accumulated depreciation | 480 | ||
Total assets | € | 725 | |
Note payable | € | 280 | |
Common equity | 445 | ||
Total liabilities and equity | € | 725 | |
There are no differences between local GAAP and U.S. GAAP for Darvish. Cubbie translates Darvish’s financial statements into U.S. dollars using the current rate method.
Required:
This solution comprises the defination of Translation exposure, and Translation exposure at december 31 ,20X1 and Translation gain or loss relating to asset and laibilities and total loss on Translation exposure.