Question

Question Following is a partial financial information from IFM Corp. Assuming the headquarter is in Chicago, and you have subsidiary in Malaysia. Your managing director need you to report financial statement consolidation from your Malaysia Branch. Formulate a translation exposure from the financial statement of you Malaysia's subsidiary into US Dollar using Current/non- current method, Monetary/non-monetary Method, and Current Rate method the current exchange and spot rate is Rm 4=$1; the historical rate Rm5=$1; Liabilities Non-current liabilities Assets Non-Current Assets Property, plant and equipment Intangible assets 1,000,000 20,000 Loans and borrowings Employee benefits Total non-current liabilities 450,000 550,000 1,000,000 Investment properties Prepaid lease payments Total non-current assets 30,000 50,000 1,100,000 Current Assets Inventories Biological assets Asset held for sale Cash and cash equivalents Total current assets Total Assets Current liabilities Trade and other payables Loans and borrowings Total current liabilities 150,000 350,000 500,000 220,000 80,000 50.000 150,000 500.000 1.600.000 Common Stock 100,000 2,000,000 1,700,000 50,000 Sale of goods Cost of sales Depreciation Operating Income Income Tax (25%) Net Income after Tax

Answer 1

C= Current exchange rate Rm 4= $1 (e.g. Inventories Rm 220000/4= $ 55000)

H= Historical exchange rate Rm 5= $1 (e.g. PP&E Rm 1000000/5= $ 2,000000

Current/Non-current Method

Assets		Current/Non-current			Liabilities		Current/Non-current
Non-Current Assets					Non-Current Liabilities
Property, Plant and Equipment	1000000	$                  200,000.00	H		Loans and borrowings	450000	$                     90,000.00	H
Intangible Assets	20000	$                       4,000.00	H		Employee benefits	550000	$                  110,000.00	H
					Total non-current liabilities	1000000	$                  200,000.00
Investment Properties	30000	$                       6,000.00	H
Prepaid Lease payments	50000	$                     10,000.00	H
Total Non-Current Assets	1100000	$                  220,000.00
Current Assets					Current Liabilities
Inventories	220000	$                     55,000.00	C		Trade and other payable	150000	$                     37,500.00	C
Biological Assets	80000	$                     20,000.00	C		Loans and borrowings	350000	$                     87,500.00	C
Assets held for sale	50000	$                     12,500.00	C		Total current liabilities	500000	$                  125,000.00
Cash and cash equivalents	150000	$                     37,500.00	C
Total Current assets	500000	$                  125,000.00			Common Stocks	100000	$                     20,000.00	H
Total assets	1600000	$                  345,000.00			Total liabilities	1600000	$                  345,000.00

Monetary/Non-monetary Method

Assets		Monetary/Non-monetary			Liabilities		Monetary/Non-monetary
Non-Current Assets					Non-Current Liabilities
Property, Plant and Equipment	1000000	$                            200,000.00	H		Loans and borrowings	450000	$                     90,000.00	C
Intangible Assets	20000	$                                 4,000.00	H		Employee benefits	550000	$                  110,000.00	C
					Total non-current liabilities	1000000	$                  200,000.00
Investment Properties	30000	$                                 6,000.00	H
Prepaid Lease payments	50000	$                               10,000.00	H
Total Non-Current Assets	1100000	$                            220,000.00
Current Assets					Current Liabilities
Inventories	220000	$                               44,000.00	H		Trade and other payable	150000	$                     37,500.00	C
Biological Assets	80000	$                               16,000.00	H		Loans and borrowings	350000	$                     70,000.00	H
Assets held for sale	50000	$                               10,000.00	H		Total current liabilities	500000	$                  107,500.00
Cash and cash equivalents	150000	$                               37,500.00	C
Total Current assets	500000	$                            107,500.00			Common Stocks	100000	$                     20,000.00	H
Total assets	1600000	$                            327,500.00			Total liabilities	1600000	$                  327,500.00

Current Rate Method

Assets		Current Rate			Liabilities		Current Rate
Non-Current Assets					Non-Current Liabilities
Property, Plant and Equipment	1000000	$                            250,000.00	C		Loans and borrowings	450000	$                  112,500.00	C
Intangible Assets	20000	$                                 5,000.00	C		Employee benefits	550000	$                  137,500.00	C
					Total non-current liabilities	1000000	$                  250,000.00
Investment Properties	30000	$                                 7,500.00	C
Prepaid Lease payments	50000	$                               12,500.00	C
Total Non-Current Assets	1100000	$                            275,000.00
Current Assets					Current Liabilities
Inventories	220000	$                               55,000.00	C		Trade and other payable	150000	$                     37,500.00	C
Biological Assets	80000	$                               20,000.00	C		Loans and borrowings	350000	$                     87,500.00	C
Assets held for sale	50000	$                               12,500.00	C		Total current liabilities	500000	$                  125,000.00
Cash and cash equivalents	150000	$                               37,500.00	C
Total Current assets	500000	$                            125,000.00			Common Stocks	100000	$                     25,000.00	C
Total assets	1600000	$                            400,000.00			Total liabilities	1600000	$                  400,000.00