what is the lesson for statement readers from all of this is it all a shell game 543802
Company A is headquartered in Country A and reports in the currency unit of Country A, the Apeso. Company B is headquartered in Country B and reports in the currency unit of Country B, the Bol. Company A and B hold identical assets, Apeso100 and Bol100, at the beginning and end of the year. At the beginning of the year, the exchange rate is Apeso1 = Bol1.25. At the end of the year, the exchange rate is Apeso1 = Bol 2. No transactions occur during the year.
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a. Calculate total assets reported by Company A and Company B at the beginning and at the end of the year. Which company has a gain and which has a loss for the year?
b. Does your answer to part a. make sense? Would it matter if Companies A and B intended to repatriate their respective foreign assets rather than keep them invested permanently abroad?
c. What is the lesson for statement readers from all of this? Is it all a shell game?
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