Retained earning translation
- Thread starter avnx
- Start date
dinesh.sundrani
New member
- Jun 18, 2026
- 0
- 0
RE is a PLUG figure
ilvino Wrote:
——————————————————-
> haha, dubbs it’s great to be back -how are things?
>
>
> Are you having the night sweats yet for LII or is
> it just me?
Things are moving along. I am a little behind. Still haven’t finished my first read of the material, but I will get there soon.
I am not having the night sweats yet, but that is probably becuase I know this year is quite a longshot. That could change as gameday approaches though.
How is your prep?
——————————————————-
> haha, dubbs it’s great to be back -how are things?
>
>
> Are you having the night sweats yet for LII or is
> it just me?
Things are moving along. I am a little behind. Still haven’t finished my first read of the material, but I will get there soon.
I am not having the night sweats yet, but that is probably becuase I know this year is quite a longshot. That could change as gameday approaches though.
How is your prep?
I’m done with my read throughs - pretty good mix of CFAI and Schweser. I’ve done a good number of q’s, but now realize I have some HUGE holes to fill in. Basically have to relearn most of PM tonight.
I’m glad to hear your still giving it a shot - I know things are tough but you’re quite the trooper and you’ll pull this off before June 7. It’s crazy to think how much we all progressed in the last two weeks or so for LI when the pressure was really on.
I’m glad to hear your still giving it a shot - I know things are tough but you’re quite the trooper and you’ll pull this off before June 7. It’s crazy to think how much we all progressed in the last two weeks or so for LI when the pressure was really on.
assumption: converting to US$
for temporal method: gain/loss translation gain in IS, Need to get Beg US$ R/E and add income from I/S
for current method: need to get beg R/E of US$, get NI of US$ AND plug the figure to balance
I hope that they will not give a question on R/E…too many steps to do
for temporal method: gain/loss translation gain in IS, Need to get Beg US$ R/E and add income from I/S
for current method: need to get beg R/E of US$, get NI of US$ AND plug the figure to balance
I hope that they will not give a question on R/E…too many steps to do
avnx Wrote:
——————————————————-
> I get the part which RE is from the NI
>
>
>
> but how about the RE carried over from previous
> year balance (assume 100% pay out ratio)?
> What rate do we use?
To try to redeem myself…..
I agree with everybody else that RE is just a plug.
RE by definition is the amount carried over from the previous year’s balance. Do all the other translating first and they plug the RE.
I haven’t looked at FSA in a long time, but that is how I remember it.
Edit: Golfer has different idea above. He sounds right.
——————————————————-
> I get the part which RE is from the NI
>
>
>
> but how about the RE carried over from previous
> year balance (assume 100% pay out ratio)?
> What rate do we use?
To try to redeem myself…..
I agree with everybody else that RE is just a plug.
RE by definition is the amount carried over from the previous year’s balance. Do all the other translating first and they plug the RE.
I haven’t looked at FSA in a long time, but that is how I remember it.
Edit: Golfer has different idea above. He sounds right.
I went back to the notes to check this out.
I think golfer is correct.
For all current:
All assets and liabilites (monetary/non-monetary) are translated at the current rate.
Common stock is translated at the historical rate.
Everything on the IS is at the average rate, so as you pointed out RE is coming in at the average rate.
BUT since A=L+E, and A and L are at the current rate E taken as a whole has to be a plug figure (to force the current rate so the equation holds).
For temporal (I am less sure on this one):
Since Rev and SG&A are at the average rate
and COGS and Dep are at the historical rate
The FX translation gain/loss will be included in NI.
Therefore, NI will be a mixed rate.
Equity will also be mixed because the change in RE (including NI) is posted to the equity accounts.
Hope this helps.
I think golfer is correct.
For all current:
All assets and liabilites (monetary/non-monetary) are translated at the current rate.
Common stock is translated at the historical rate.
Everything on the IS is at the average rate, so as you pointed out RE is coming in at the average rate.
BUT since A=L+E, and A and L are at the current rate E taken as a whole has to be a plug figure (to force the current rate so the equation holds).
For temporal (I am less sure on this one):
Since Rev and SG&A are at the average rate
and COGS and Dep are at the historical rate
The FX translation gain/loss will be included in NI.
Therefore, NI will be a mixed rate.
Equity will also be mixed because the change in RE (including NI) is posted to the equity accounts.
Hope this helps.
dinesh.sundrani
New member
- Jun 18, 2026
- 0
- 0
golfer Wrote:
——————————————————-
> assumption: converting to US$
>
> for temporal method: gain/loss translation gain in
> IS, Need to get Beg US$ R/E and add income from
> I/S
>
> for current method: need to get beg R/E of US$,
> get NI of US$ AND plug the figure to balance
>
> I hope that they will not give a question on
> R/E…too many steps to do
This is totally correct! Could’nt have summed up any better that golfer has done.
——————————————————-
> assumption: converting to US$
>
> for temporal method: gain/loss translation gain in
> IS, Need to get Beg US$ R/E and add income from
> I/S
>
> for current method: need to get beg R/E of US$,
> get NI of US$ AND plug the figure to balance
>
> I hope that they will not give a question on
> R/E…too many steps to do
This is totally correct! Could’nt have summed up any better that golfer has done.
- Thread starter
- #19
golfer:
I am still not very sure what you mean by “plug the figure”
Looking at schweser book 2 page 250
it seems like what they are doing is simply:
1) translate the RE from last balance using hist rate
2) translate the NI using avg rate (thus getting the addition RE)
then add them up
am I missing something here?
I am still not very sure what you mean by “plug the figure”
Looking at schweser book 2 page 250
it seems like what they are doing is simply:
1) translate the RE from last balance using hist rate
2) translate the NI using avg rate (thus getting the addition RE)
then add them up
am I missing something here?
avnx Wrote:
——————————————————-
> golfer:
> I am still not very sure what you mean by “plug
> the figure”
> Looking at schweser book 2 page 250
>
> it seems like what they are doing is simply:
> 1) translate the RE from last balance using hist
> rate
Yes.
> 2) translate the NI using avg rate (thus getting
> the addition RE)
Yes.
>
> then add them up
Yes.
>
> am I missing something here?
I think the plug comes in the form of the currency translation adjustment (CTA). It forces all of Equity to equal the current rate.
For the temportal method the CTA comes through on the IS.
——————————————————-
> golfer:
> I am still not very sure what you mean by “plug
> the figure”
> Looking at schweser book 2 page 250
>
> it seems like what they are doing is simply:
> 1) translate the RE from last balance using hist
> rate
Yes.
> 2) translate the NI using avg rate (thus getting
> the addition RE)
Yes.
>
> then add them up
Yes.
>
> am I missing something here?
I think the plug comes in the form of the currency translation adjustment (CTA). It forces all of Equity to equal the current rate.
For the temportal method the CTA comes through on the IS.