Translation of Financial Statement in The Foreign Currency Under Previous Law, Accounting in Foreign Currency

Group Assignment of Advanced Financial Accounting
On Back ground of Accounting and reporting of foreign currency

Transaction
 Accounting is carried out in the national currency or in the currency
relevant for the business activities.
 Reporting of foreign currency is presenting of currency language Financial
statement are presented currency or in currency relevant to the company
business activities .If the national currency not used the value must also be
show in national currency .The exchange rate Applied must be disclose in
the note to the account and if applied explained.
Determination of Functional currency

The accounting and financial reporting may be prepared in the currency relevant to the
company business activities although, the law does not define the term currency relevant to
the company business activities. It can be deducted that it should be the currency that allow
third parties to reliable judgment about the company economic situation.
The following factors should determine functional currency

 The currency in which the sales price of good and service are denominated and settled
 The currency of country whose competitive force and regulation mainly determine the
sale price of the company good and service.
 The currency mainly influence lab our, materials, and other cost of providing good
and
Service.
Changing the currency of accounting and or Financial Reporting

Translation of financial statement in the foreign currency under previous law,
accounting in foreign currency.
 Under previous law the inventory, the income statement as well as the balance
sheet had to be prepared in the national currency .The accounting currency was not
regulated by law. In practice accounting in foreign currency was accepted as long as
the annual financial statement which prepared in Swiss franc in accordance with
company law provision.
 There were two basic essentially option for converting foreign currency
account in to financial statement in Swiss Franc
A. Modified current and Non- current Methods

 Translation of current asset and liability at the closing rate
 Translation of non-monetary and non-current asset at historical cost
 Translation of monetary and non-monetary asset at historical rate or lower
closing rate respectively
 Translation of monetary and non –monetary liability at historical rate high
closing rate respectively
 Translation of shareholder equity at historical rate
 Translation of income statement at the annual average rate
 Recognition of translation difference in income statement taking in to account
in the imparity principles
B. Modified closing rate Method

 Translation of asset and liability at the closing rate
 Translation of the shareholder equity at historical rate
 Translation of income statement at annual Average rate
 Recognition of translation difference in income statement taking in to account
the imparity principles (provision of unrealized gain )
 Changing the currency of Accounting and or Financial Reporting

over view of Alternative
If currently keeping account in foreign currency a company may choose between following
two option for changing currency the currency used for the financial statement, depending on
the chosen option, the financial impact in the year of transition may vary significant.
Accordingly it is recommended to carefully assess the impact of beforehand.
If currently keeping account in Swiss franc a company has only one recognized option and
accordingly no possibility to influence the translation impact. Depending on current
accounting currency the chosen alternative as well as the method and used until now for the
translation of the financial statement. The following outline the Approach to changing
currencies recognized by the auditing professional using illustrative example
Existing Accounting Information in foreign Currency.
Option 1. Conversion based on the last annual financial statement in Swiss franc
A.Previous translation in to CHF using modified currently /non-current Method. Consist of
transparent and traceable translation from the last annual financial statement in the Swiss
franc to the opening balance sheet in the foreign currency .Conversation date thus
establishing new historical carrying amount and exchange rate. However the exception of the
net working capital, those calculated foreign currency value with most probably not
correspond to the underlying already existing accounting information in the foreign currency
as latter value were translated in to Swiss franc at historical rate for preparing the financial
statement .
For the conversion it is recommended to follow there were three step;
1. Asset and liability from the last financial statement in Swiss franc are translated in to
the foreign currency in question using the exchange rate at the date of change. IFRS
user are familiar with this types of conversion from the change of financial currency in
IAS 21, 35 and IAS 37.
2.

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Translation of Financial Statement in The Foreign Currency Under Previous Law, Accounting in Foreign Currency

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Group Assignment of Advanced Financial Accounting

On Back ground of Accounting and reporting of foreign currency

Determination of Functional currency

The following factors should determine functional currency

Changing the currency of accounting and or Financial Reporting

A. Modified current and Non- current Methods

B. Modified closing rate Method

 Changing the currency of Accounting and or Financial Reporting

Existing Accounting Information in foreign Currency.

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