| Course | ACC 405 Advanced Accounting |
|---|---|
| Module | Module 6 |
| Paper type | undergraduate discussion post on foreign currency translation and remeasurement |
| Length | About 430 words, 3 pages |
| Format | APA 7 student paper |
| School | Southern New Hampshire University |
| Program | BS Accounting |
| Updated | October 2026 |
Free sample paper for ACC 405 Module 6
Module Six Discussion
Three Cents and a Quarter Million Dollars
The maple company I have followed in this course owns a bottling subsidiary near Quebec City that buys syrup from local sugarmakers, employs Quebec workers and sells to Canadian grocery chains. Over the year the Canadian dollar slid from 75 to 72 U.S. cents. The subsidiary had a good year in its own currency, earning 1 million Canadian dollars. In the parent's consolidated statements, though, it produced a quarter-million-dollar loss. Where that loss belongs is the question for this module.
Everything starts with choosing the functional currency, which the standard ties to where an entity mainly earns and spends its cash (Financial Accounting Standards Board, 1981). Its sales prices, labor, syrup purchases and financing are all in Canadian dollars, and it operates largely independently of the parent. Its functional currency is therefore the Canadian dollar, and its statements are translated into U.S. dollars using the current rate method (Hoyle et al., 2021).
Under that method, assets and liabilities are translated at the year-end rate of 72 cents, income statement items at the average rate of 73.5 cents and equity at historical rates. The difference that results is the translation adjustment. It has two parts. The subsidiary began the year with net assets of 8 million Canadian dollars; at 75 cents they were worth $6,000,000, and at 72 cents they are worth $5,760,000, a $240,000 decline. The year's income of 1 million was translated at 73.5 cents, $735,000, but is now carried at 72 cents, $720,000, a further $15,000. Together that is a $255,000 translation loss, which lands in other comprehensive income and leaves net income untouched.
If the subsidiary's functional currency had been the U.S. dollar, for example because it mainly bottled for the parent and priced in dollars, its statements would be remeasured with the temporal method, and exchange differences on its monetary items would go straight into net income. The economic event would be similar; the reported earnings would swing with the exchange rate.
Is the translation adjustment real? Louis (2003) found that translation adjustments are negatively associated with firm value for many manufacturers, suggesting that a weaker foreign currency can signal better competitive position for exporters rather than a simple loss. For this bottler, which sells in Canada, a weaker Canadian dollar does lower the dollar value of its future cash flows, so the loss in other comprehensive income seems a fair signal.
For classmates: should a $255,000 currency loss bypass net income just because the subsidiary keeps its books in Canadian dollars, or would users be better served if it appeared in earnings?
References
Financial Accounting Standards Board. (1981). Foreign currency translation (Statement of Financial Accounting Standards No. 52). Author.
Hoyle, J. B., Schaefer, T. F., & Doupnik, T. S. (2021). Advanced accounting (14th ed.). McGraw Hill.
Louis, H. (2003). The value relevance of the foreign translation adjustment. The Accounting Review, 78(4), 1027-1047. https://doi.org/10.2308/accr.2003.78.4.1027
What the ACC 405 Module 6 instructions ask for
The Module Six discussion in ACC 405 usually asks about foreign currency: how a parent determines a foreign subsidiary's functional currency and how the subsidiary's statements are translated or remeasured into the reporting currency. Expect a post of several paragraphs with the textbook and the standard cited, plus replies. The best answers pick one subsidiary and one rate move, apply the current rate method or the temporal method with numbers, and explain why the resulting adjustment goes to other comprehensive income or to net income. Many prompts also ask whether translation adjustments reflect real economic gains or losses. Ending by inviting classmates to weigh the method itself, not just its arithmetic, gives the replies somewhere to go.
How this ACC 405 Module 6 discussion example is built
The post describes a Quebec bottler that buys syrup from local producers, pays workers and sells to Canadian grocers in Canadian dollars. Because its cash flows are mainly in Canadian dollars, that is its functional currency, and its statements are translated with the current rate method. Net assets of 8 million Canadian dollars lose $240,000 of dollar value as the rate falls three cents, and the year's income of 1 million, translated at the 73.5-cent average, adds another $15,000 of loss when the balance sheet is translated at year end. The $255,000 goes to other comprehensive income. Under remeasurement it would hit net income. Louis's research on translation adjustments frames the question for classmates.
Where the ACC 405 Module 6 rubric puts the points
Graders of the ACC 405 foreign currency discussion typically look for correct determination of functional currency using the economic indicators, accurate application of the translation or remeasurement method with numbers, correct placement of the adjustment and credible sources. Top posts compute the cumulative translation adjustment from its components and explain why it bypasses net income under the current rate method. Posts that confuse translation with remeasurement, or put the translation adjustment in income, score lower. Replies that test a classmate's functional currency choice, for example for a subsidiary that sells mainly to the parent, add to the participation grade and show real command of the indicators.
ACC 405 Module 6 help: the mistakes that cost points
Posts on this topic most often go wrong by assuming the parent's currency is always the functional currency, by using the year-end rate for income statement items or by putting the translation adjustment in net income. Posts also tend to leave out what the adjustment means economically: it reflects a change in the dollar value of net assets held abroad, not a cash loss. If your prompt involves a subsidiary in a highly inflationary economy or a transaction denominated in a foreign currency, the rules differ and the post can be adjusted to them. Show the arithmetic for the adjustment in two lines so classmates can follow it.
Get ACC 405 Module 6 written to your instructions
Send the ACC 405 Module 6 prompt and the subsidiary facts it gives. The post will determine the functional currency, apply translation or remeasurement with the numbers shown, explain where the currency effect is reported and close with a question for classmates. Delivery is usually two days out, with no fee on your first request. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.
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ACC 405 Module 6 questions, answered
Where can I find a free ACC 405 Module 6 Discussion sample?
This page includes the full ACC 405 Module 6 post translating a Quebec subsidiary's statements and explaining the translation adjustment.
What is a functional currency?
The currency of the primary economic environment in which an entity operates, usually the one in which it generates and spends cash.
What is the current rate method?
A translation method that uses the year-end rate for assets and liabilities, the average rate for income items and historical rates for equity, with the difference reported in other comprehensive income.
When is remeasurement used instead of translation?
When a foreign entity's books are kept in a currency other than its functional currency, or when its functional currency is the parent's. Remeasurement gains and losses go to net income.
Is the cumulative translation adjustment a realized loss?
No. It reflects the change in dollar value of net assets held abroad and is reclassified to income only when the foreign operation is sold or substantially liquidated.