Temporal Method | Definition | Merits & Demerits

Описание: In this video, Temporal Method we will discuss the definition of Temporal Method along with its exchange rates, merits and demerits

𝐖𝐡𝐚𝐭 𝐢𝐬 𝐓𝐞𝐦𝐩𝐨𝐫𝐚𝐥 𝐌𝐞𝐭𝐡𝐨𝐝?
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Temporary rate method, or the historical rate method, is used to transform financial statements of foreign subsidiaries of parent firm from their local currency to their "reporting" or "functional" currency if the functional currency and local currency are not identical.

𝐄𝐱𝐜𝐡𝐚𝐧𝐠𝐞 𝐑𝐚𝐭𝐞𝐬 𝐀𝐩𝐩𝐥𝐢𝐞𝐝 𝐟𝐨𝐫 𝐓𝐞𝐦𝐩𝐨𝐫𝐚𝐥 𝐌𝐞𝐭𝐡𝐨𝐝
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#1 - Current Exchange Rate
#2 - Historical Exchange Rate
#3 - Weighted Average Exchange Rate

𝐌𝐞𝐫𝐢𝐭𝐬 𝐨𝐟 𝐓𝐞𝐦𝐩𝐨𝐫𝐚𝐥 𝐌𝐞𝐭𝐡𝐨𝐝
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#1 - Temporal Method Lines with the basis of valuation used in accounting.

#2 - Temporal Method will still be misspecified, but only to the degree that the accounting numbers are already underlying.

𝐃𝐞𝐦𝐞𝐫𝐢𝐭𝐬 𝐨𝐟 𝐓𝐞𝐦𝐩𝐨𝐫𝐚𝐥 𝐌𝐞𝐭𝐡𝐨𝐝
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#1 - The company's financial statements will be highly volatile.

#2 - The mixing of valuations creates a big ambiguity.

If you want to know more about 𝐓𝐞𝐦𝐩𝐨𝐫𝐚𝐥 𝐌𝐞𝐭𝐡𝐨𝐝, you can visit the 𝐥𝐢𝐧𝐤 𝐩𝐫𝐨𝐯𝐢𝐝𝐞𝐝 𝐡𝐞𝐫𝐞:- https://www.wallstreetmojo.com/tempor...

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