Temporal and Current Rate Method

I was terrible at this. Thank god this doesn’t continue in Level 3.

@diya I do memorise the stuff in this topic however sometimes you might forget in the exam so following is the method i used to memorise the appreciation/depreciation of the foreign currency (of your subsidiary)

GBPUSD 1.5 (1gbp = 1.5usd)

A subsidiary in US owned by a UK company, has an asset of $150k (which means £100k)

Now, depreciating your foreign currency GBPUSD 2.0 (1gbp = 2usd)

your existing asset in the US subsidiary $150k is now only £75k.

Hence, depreciation FOREIGN currency = LOSS in ASSET

the opposite of that is GAIN in LIABILITY (theory behind it? since depreciated foreign currency resulting in a loss in the subsidiary’s asset value, likewise the liability will be smaller too. Remember liability is negative hence smaller negative = gain!)

And obviously the opposite of depreciation (appreciation):

GAIN in Asset
LOSS in Liability

hope that helps.

lol @diya. I remember this well too.

If you have a specific question do share it here and we can dissect it together.

Ah I remember this one well @Diya! I think it’s best to wait until you come across a specific example question, and we’ll walk through it trying to see where the gaps in your understanding is.

It took me a while to make sense of it, but it can be distilled in a logical sequence.