Monetary/nonmonetary and temporal method

Question

Discuss dissimilarity in translation process between monetary/nonmonetary and temporal method.

Answer 1

In the monetary/nonmonetary method, all monetary balance sheet accounts of the foreign subsidiary are translated at current exchange rate.  Another balance sheet accounts are transformed at historical rate exchange rate in effect while the account was first recorded.  Within the temporal method, monetary accounts are translated at current exchange rate.  Other balance sheet accounts are also converted at the current rate, if they are carried on books at the current value.  In case they are carried out at the historical value, they are translated at rate in effect on date the item was put on the books.  As fixed assets and inventory are generally carried at the historical costs, temporal method and the monetary/nonmonetary method will normally offer the same translation.