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  1. How accounting disclosure practices are influenced by differences in corporate financial governance of a State?

Corporate governance related to the internal tools used for running and controlling a firm responsibility, accountability and the relationship between the shareholders, board members and managers are designed to achieve corporate objectives. The problems of corporate governance include the rights and treatment to the shareholders, the board’s responsibilities, disclosure and transparency and the role of the parties concerned. Corporate governance practices has gained the attention of regulators, investors and analysts.

Disclosure of the company’s annual report on emerging market countries are generally less extensive and less credible than the reporting companies in developed countries. For example, the disclosure of which is insufficient and misleading and neglected consumer protection cited as the cause of the East Asian financial crisis in 1997.

Low level of disclosure in emerging market countries is consistent with the system of corporate governance and finance in these countries. Less developed equity markets, banks and internal parties such as family groups distribute most pendanaa needs and generally not too much of a need for public disclosure of credible and timely manner, when compared with the more advanced economies.

However, investor demand for information about the company in a timely and credible in emerging market countries more and more regulators to respond to this demand by creating more stringent disclosure provisions and increase surveillance efforts andenforcement.

  1. Understanding the issues – issues that affect management’s decision to make disclosure decisions?

Decision Making in Management

Problem Definition and Decision Making
Problem (problem) is a deviation between the should (should) happen in a real (actual) occurs, so that the cause should be found and verified.
Decision Making
Decision-making (desicion making) is to assess and impose pilihan.Keputusan was taken after some calculations and considerations alternatif.Sebelum option was dropped, there are several steps that may be traversed by the decision maker. These stages may include identification of major problems, menyusn alternative will be selected and arrive at the best decision. In general, the notion of decision making has been suggested by many experts, such as:
Steps in Problem Analysis
a.  Determining the purpose of determining the first target without confusing what is to be achieved and what you want done
b. Gather facts by studying the records are relevant, applicable rules and customs, talk to the person concerned to know the opinion
c.  Consider the facts and determine the follow-up to be taken by connecting facts with one another.
d. Take action with respect to:
* Determine who should take action.
* Consider who should be informed of the decision to be taken
* Determine the appropriate time to carry out actions that have been decided.
e.  Check the results of its implementation to determine whether the objectives achieved and learned changes in attitudes and relationships between one party to another party.


  1. Identifying the purpose of accounting disclosure in the equity markets?
    Accounting Disclosure purposes in Equity Markets
    In a competitive economy, the disclosure is a means to channel koorperasi koorperasi accountability to capital providers (investors) and to mepermudah allocation of resources to their most productive use.

    Koorperasi a need to attract capital in a very large amount to finance the production and distribution activities are extensive. Therefore internal pembiyaan is highly dependent on external capital invested by the investor on a koorperasi, In return, an investor requires disclosure (tansparansi koorperasi) in which investors can assess the quality of their stock to cultivate.

    Conceptual link between disclosure and cost of capital meingkat of the theory of investment behavior under conditions of uncertainty :

    1. In a world of uncertainty, investors look at returns on investment securities as money received as a consequence of ownership.
    2. Because of the uncertainty of return is viewed in a probabilistic sense.
    3. Investors use a number of different measures to quantify the expected results of a security.
    4. Investors prefer a high return rate for a certain risk level or vice versa.
    5. The value of a security is positively related to the flow of expected results and inversely related to the risks associated with the refund.
    6. Thus, disclosure of the company will increase the probability distribution of outcomes expected by investors by reducing the uncertainty associated with the refund. So will improve performance (performance of the company) in the eyes of investors that lure investors to invest on a larger similar securities so as to reduce the cost of capital.


  1. Understanding the fundamental differences corporate financial disclosure practices in various aspects?
    Notes to the financial statements intended to amplify or clarify items presented in the main part of the financial statements (income statement, changes in capital, balance sheet and cash flow). In most cases, all the necessary data reader, can not be presented in the financial statements themselves, therefore the report must include the essential information presented in the notes to financial statements. Notes to the financial statements may take the form of narrative, in part or in full. Notes to the financial statements are not only helpful for users who do not report such a quantitative understanding of accounting information but is also important to understand the performance and financial position.
    Level of disclosure in the financial statements are the things that need to be considered by the assessment (judgment) managers. Level of disclosure that is moving towards full disclosure (full disclosure) will reduce the information asymmetry is a necessary condition (Necessary condition) to do earnings management (Trueman and Titman, 1998). Therefore the level of disclosure is negatively related to earnings management. Companies with a minimum level of disclosure likely to do earnings management and vice versa (Lobo and Zhou, 2001) in Yanivi (2003).
    In the statement of financial accounting standards (SFAS) No. 1 on presentation of financial statements, paragraph 70 says:
    Notes to the financial statements include narrative explanations or details of the amount shown in the balance sheet, income statement, cash flow statement and statement of changes in equity as well as additional information such as contingency obligations and commitments. Notes to the financial statements also include the information required and encouraged to be disclosed in the Statement of Financial Accounting Standards and other disclosures necessary to produce a fair presentation of financial statements.
    Notes to the financial statements disclose:
    A. Information on the basic financial statements and accounting policies are selected and assigned to important events and transactions.
    2. The information presented in GAAP but not presented in the balance sheet, income statement, cash flow statement and statement of changes in equity.
    3. Additional information is not presented in the financial statements but is required in order to be fair representation.
    The more complete informsi disclosed in the notes to the financial statements (full disclosure) the financial statements, the reader will further understand the company’s financial performance.
    Rate Disclosure
    In deciding what information will be reported, the usual practice is to provide sufficient information for judgments and decisions affecting the users. This principle is often referred to as full disclosure (full disclosure), recognizes that the nature and amount of information included in financial statements reflect a series of trade off assessments. This trade off between (1) the need to disclose in sufficient detail the things that will affect the decisions of users, with (2) the need to condense the presentation of information in order to be understood. In addition, preparation of financial statements must also take into account the cost of manufacture and use of financial statements (Kieso and Weygandt, 2002).
    In case of information asymmetry is high, then the users of financial statements do not have enough information to know whether the financial statements, in particular earnings have been manipulated. Microstructure market theory says that one of the adverse selection problem faced by decision makers is the possibility of firm-specific information that the material not disclosed to the public (Yanivi, 2003). Capital market regulators to reduce this information asymmetry by making the minimum requirement for disclosure needs to be done by the companies listed on stock exchanges. One such regulation is the decision of the Capital Market Supervisory Board chairman KEP-06/PM/2000 number of guidelines for financial statement presentation. Greenstein and Sami (1994) in Yanivi (2003) examined and found that the obligation of the Securities Exchange Committee (SEC) regarding the disclosure of public enterprise segment in the U.S. stock market has reduced the information asymmetry is indicated by a decrease in bid-ask spread of the company.
    Level of disclosure in the financial statements will help users of financial statements to understand the content and the numbers reported in financial statements. There are three levels of disclosure that is full disclosure, disclosure is reasonable, and adequate disclosure. Refers to the full disclosure of all information provided by the company, well-informed financial and nonfinancial information. Full disclosure not only include the financial statements but also includes information provided in the management letter, company prospect, and so on. Adequate disclosure is the disclosure required by applicable accounting standards. While the disclosure is reasonably adequate disclosure coupled with other information that could affect the fairness of financial statements such as contingencies, commitments and so forth.
    Imhoff and Thomas (1994) in Yanivi (2003) proved that the quality rating of the analysis was positively related to conservatism in the estimation and selection of accounting methods, and a number of detailed disclosures on the reported figures. The implications of this discovery is a company that is more conservative in making estimates and choose the method of accounting (or management company with a level of income / low income smoothing) will reveal more information. If companies choose to report conservative earnings management / low earnings smoothing. Then it shows a negative relationship between income smoothing the level of disclosure.
    Quality of Disclosure
    Disclosure quality in corporate annual reports known by a variety of concepts. Among others, the sufficiency (adequacy) (Buzby, 1975), completeness (comprehensiveness) (Barrett, 1976), Informative (informativeness) (Alford et al., 1993), and on time (time lines) (Courtis, 1976; Whittred, 1980 ). Imhoff (1992) refers to the level of completeness as a characteristic quality of disclosure, while Singhvi and Desai (1971) refers to the completeness (completeness), accuracy (Accuracy), and reliability (reliability) as the characteristic quality of disclosure. Empirical indicators of the quality of expression in the form of disclosure index (disclosure index) which is the ratio (ratio) between the number of elements (items) information that is filled with a number of elements that might be met. The higher the number the disclosure index, the higher the quality



  1. Distinguish between the translation and conversion of foreign currency?
    Translation is the process of restatement of financial statements information from one currency to another currency.
    • The issue of exchange rate combined with a variety of translation methods that can be used and the treatment of “Profit / Loss” the translation of different makes comparison of financial statements results from one company to another or the same firm in different periods be difficult.
    • Reasons translational
    • Companies with overseas operations is the Company with extensive operations, can not prepare consolidated financial statements if their accounts and the accounts of subsidiaries are not disclosed in the single currency.
    • The scale of international investment activity that extends the current increases the need to deliver information to readers in other countries who make significant consolidated financial statements that enable the reader to gain a holistic understanding of the operating companies, both domestic and foreign
    Reasons translational
    Another reason:
    • Take note of the foreign exchange transactions
    • Reporting the activities of international branches and subsidiaries
    • Reporting the results of independent operations overseas
    • Terminology
    • Translation is not equal to the Conversion.
    • Conversion: physical exchange takes place between currencies
    • Translation only change in monetary units.
    • There is no physical exchange that occurred.
    • There are no related transactions that occur, like when done conversion.
    • The value of domestic equivalent of foreign currency obtained by multiplying the balance in foreign currency with the direct exchange rate quota.
    • Terminology
    SPOT market
    • The agreement to exchange a certain amount of a currency with another currency to be delivered in 2 days.
    • The exchange rate is expressed in two ways:
    – A direct quotation ($ 1 = Rp 9,000)
    – Indirect quotation (Rp1 = 0.0001111111111 USD)
    FORWARD market
    • The agreement to exchange a certain amount of a currency with another currency in the foreseeable future
    • Terminology
    FORWARD market
    • Bid quote: the amount paid dealer (dealer) to a foreign currency
    • Ask quote: foreign exchange dealers are required to sell a foreign currency
    SWAP transactions
    • The transaction when buying spot and selling forward or spot sales and forward purchases of foreign currencies occurred simultaneously.
    • Terminology
    • Income (profit) obtained from the difference in purchase price (bid price) the price (asking price).
    Functional Currency
    • Exchange of a company in conducting its operations abroad, the country where the currency is usually the company’s operations are concerned.
    • Currency Translation Methods UangAsing
    • Method of Single Currency (Single Rate)
    • The method of multiple exchange rates (Multiple Rate)
    * Methods now – non-present (current-non current)
    * Monetary method – non-monetary
    * Method of temporal
    • Currency Translation Methods UangAsing
    • Method of Single Currency (Single Rate)
    • Example: U.S. MNC affiliate companies overseas to purchase land in the early period of the   price of VA 1,000,000.
    • Historical Currency: VA 1 = $ 1, then the historical price: $ 1,000,000
    • Land prices rise so VA 1,500,000, and the exchange rate drops to $ 1 = 1.4 VA, so foreign assets to $ 714,286, meaning LOSS 285.714.
    • Added value of the land market to be $ 1,071,285 (1.5 million VA: VA 1.4).
    • Currency Translation Methods UangAsing
    • The method of multiple exchange rates (Multiple Rate)
    * Methods now – non-present (current-non current)
    – Current assets and current liabilities of overseas subsidiaries are translated into the reporting currency exchange rate applicable to the parent company.
    – Assets and liabilities are translated NON smoothly with historical rates.
    • Currency Translation Methods UangAsing
    • The method of multiple exchange rates (Multiple Rate)
    * Monetary method – non-monetary
    – Assets and liabilities (cash, receivables and debt) are translated using the exchange rate prevailing
    – NON monetary element (fixed assets, investments and inventory jk.pjg, translated using historical rates)
    • Currency Translation Methods UangAsing
    • The method of multiple exchange rates (Multiple Rate)
    * Method of temporal
    – Money, accounts receivable and debt are measured on the number promises should be translated using exchange rates prevailing at balance sheet date.
    – Elements of non-monetary are translated at the exchange rate basis in accordance with the original measurements.
    • The effect on the translation of financial statements
    1. Present exchange rate (current) is the exchange rate at the date of the financial statements.
    2. Historical exchange rate is the exchange rate at the time an asset is denominated in foreign currency was first acquired, or when a foreign currency liabilities in the first place.
    3. Average rate (average) is the simple average of the exchange rate now and historically.
    • Effect of use of the exchange rate on the financial statements
    1. The use of the exchange rate to protect the historical financial statements of profits and foreign currency translation loss
    2. The use of the exchange rate now lead to a gain or loss on translation.
    • foreign currency transactions
    • foreign currency transactions occur when a company buys or sells goods to the payments made in a foreign currency or when companies borrow or lend in foreign currencies.
    • A foreign currency transactions can be denominated in one currency, but the measured or recorded in other currencies
    • foreign currency transactions
    Gain / loss transactions: the difference between the rate of exchange on the date of recording of transactions and the exchange rate at the date of payment of x amount payable in foreign currencies.
    • Importers of Indonesia to buy goods from U.S. companies worth $ 1,000,000 when the exchange rate 1 USD = Rp 9,500.
    • Perush.Indonesia pay the debt within 30 days when the exchange rate $ 1 = Rp 9600, then there is a loss transaction Rp 100,000 (1,000,000 x (Rp9.600 – Rp9.500))
    To record the transaction loss, can use two approaches: one transaction and two transactions.


  1. Understanding the terms – in terms of foreign currency translation?
    Translation is the translation of foreign currency. Translation is a foreign exchange (governed by the IAD 21)
    A. Translation occurs when the subsidiary company has been significant, and there is MNC (Multy National Corporete)
    2. Translational change in different units into units of money.
    3. bermaun translational crucible

    Translation is a translation process programming language (source code) to make a file or other form of display. Transalai process includes the terms: Compile, Interpret, and Link. Computer application programs (software) which is developed can be in three forms:
    A. Source-code
    2. Intermediate-code
    3. The executable code

    There is a two stage process of translation:
    A. Translation of the source-code to the intermediate-code
    2. Translation of the intermediate-code into executable code

    Variations Translation Approach
    Translational approach in the form of computer program source-code into executable code:
    A. Full-interpretation. Translation of the source-code directly into executable code by using the stage sat alone.
    2. Mixed. Translation of the source-code to the intermediate-code is compiled (generated output file). Translation of the intermediate-code into executable code is interpret (not generated output file).
    3. Full-compilation. Translation of the source-code to the intermediate-code is compiled (no file output). Translation of the intermediate-code into executable code to be compiled as well (no file output). Word ‘compile’ is used as a term that generates the output file translation. Henceforth, the word compile meaningful ‘translation of the source-code to the intermediate-code (which generates an output file)’. In practice, the use of this word so carelessly, it could mean anything.


  1. Knowing the differences advantages and disadvantages of foreign currency translation?
    Accounting treatments led to international adjustments are as diverse as translation procedures behind them. Therefore, solutions that make sense to the problem of how to treat the “profit or loss” of this translation is needed.
    Approaches for accounting for translational adjustment of the approach initiated deferral (delay) to an approach that does not require a delay at all, with treatments of hybrid between the two.
    Major deferal.Memasukkan translation adjustments in the profit goes to the general public was opposed on the grounds that the adjustments are just a product of the process of re-presentation. Namely, the changes in the domestic currency equivalent of the net assets of overseas subsidiaries ‘unrealized’, has no effect on the local currency cash flows generated by overseas entities that may be re-invested or paid back to the parent company. Incorporate such adjustments in current earnings, thus, be misleading. In these situations, must be accumulated translation adjustments separately as part of consolidated equity.
    Even so, the deferral approach, possibly contested on the grounds that the exchange rate does not return to its original state by itself. Even if that happens, the adjustment-penyesuaiati deferral or the transaction will be based on the predictions of the exchange rate, the efforts of the most difficult in practice. Situations may arise where the operating results have misstated because of forecasting errors. For some, delay or loss of translational advantage over the behavior of exchange rate changes, ie, exchange rate changes historical facts and user-pemalcai keuanganakan report served well if the effects of exchange rate fluctuations are recorded when these effects arise. According to FAS No. 8 (paragraph 199), “Currency is always fluctuating; accounting should not give the impression that the exchange rate is stable”.
    Deferral and amortization. Some observers like the delays and gains and losses mengamortisasikan translation adjustments during the age of balance sheet items are concerned. Mark against the dollar appreciation between the date of the consolidation of translational yield losses. Based on the assumption that the cost of the asset including the sacrifices necessary to reduce and remove the associated liabilities, losses will be treated as a translation of part of the cost of the relevant asset and amortized into expense over the asset Such age.
    No deferral. The third choice in accounting for translation gains and losses is to recognize the loss or gain in the income statement immediately. Delays of any kind is considered false and misleading. In addition, the criteria for a delay was considered impossible to implement and internally inconsistent. Thus, the traditional approach is to recognize losses immediately but only recognizes gains these gains have been realized so far. Although conservative, delays translational advantage solely because of the advantages “reject” that exchange rate changes have occurred.
    Enter translation gains and losses in current earnings, unfortunately, means involving random elements in the profits that could result in significant earnings volatility every time the exchange rate change. In addition, include gains and losses “on paper” similar to the reported earnings to mislead readers of financial statements, because the correlation, this adjustment does not always provide information that matches the expected economic impact of exchange rate changes on cash flows of the company.


  1. Calculate gains and losses of foreign currency transalasi ?
    In essence, accounting for the flow of foreign denominated transactions are as follows:
    At the time of the first transaction, the transaction value is recognized or recorded at the invoice (invoice)
    At each reporting such transactions in translasikan to convert the transaction into the functional currency (Rupiah) in accordance with the conversion method used, at this time will be recognized PROFIT or LOSS (DIFFERENCE) EXCHANGE, which in the English language is called Exchange Gain / Lost .
    At the time of payment (settlement) on the transaction (whether it be a transaction on assets or liabilities), the value of foreign denominated transactions will be synchronized again by converting it into the functional currency (Rupiah). This conversion process will result in a PROFIT or LOSS (DIFFERENCE) EXCHANGE (Exchange Gain / Lost).
    Dated January 31, a company in Indonesia to buy merchandise from the United States with a value of USD 1,000.00 invoice, Close the book on March 20, fiscal, and payment will be due on the 30th of April, and
    Meanwhile, the exchange rate situation at that time described as follows:
    28 February, 1 USD = Rp 9.000, –
    March 20, 1 USD = Rp 9.100, –
    30 April, 1 USD = Rp 9.200, –
    Transactions on the above, can be recorded by journal entry:
    The purchase date (28 February):
    [Debit]: Purchase = Rp 9,000,000, –
    [Credit]: Accounts Payable = Rp 9,000,000, –
    At the time of closing the fiscal (March 20):
    The exchange rate has changed, terdepriasi rupiah at Rp 100, – / 1 USD, so the company suffered losses of Rp 100 x 1000 = Rp 100.000. It is recognized as foreign exchange losses, and adjusted to the journals:
    [Debit]: Loss (Difference) Rate = Rp 100.000, –
    [Credit]: Accounts Payable = Rp 100.000, –

    While the debt at maturity:
    Rupiah depreciated to Rp 200, – / 1 USD compared to when a purchase is made, the Journal of the pay-off is to be:
    [Debit]: Accounts Payable = Rp 9,000,000, –
    [Debit]: Loss (difference) Currency = Rp 200.000, –
    [Credit] Cash = Rp 9,200,000, –
    Recognition of Gain or Loss When Exchange
    From the example above, if observed carefully, it is clear GAIN or LOSS (Difference) EXCHANGE GAIN RECOGNIZED ON WHERE THE LOSS OCCURRED OR. In the above exchange rate losses are recognized:
    In the Fiscal Report, recognized foreign exchange losses amounting to Rp 100.000 that is only on the date of closing the book fiscal (March 20).
    Report on Commercial, recognized foreign exchange losses amounting to Rp 200,000 at the time of settlement (payment) made (30 April).


  1. Understanding the effect of using various methods of foreign currency translation of financial statements?
    The following third exchange rate used during the translation of balances in foreign currencies into their domestic currency. First, this exchange is the exchange rate at the date of the financial statements. Second, the historical exchange rate is the exchange rate at the time an asset is denominated in foreign currency was first acquired, or when a foreign currency liabilities in the first place. Finally, the average rate is a simple average or weighted exchange rate or exchange rate is now historical. Influence the use of historical exchange rate compared to the exchange rate is now on the financial statements when used as koofisien foreign currency translation. Historical exchange rate generally maintain the initial cost is equivalent to an item in a foreign currency denominated in domestic currency reports.
    A. Single Rate Method
    Based on this translational approach, the financial statements of foreign operations, which are considered by the parent company as an autonomous entity, has the reporting of their own domicile. This is a local accounting environment where foreign affiliates are mentraksaksikan his business affairs. To maintain the “flavor” of the local currency reports, a way must be found so that translation can be implemented with minimal distortion. The best way is the use of the method of exchange rate policies.
    Since all financial reports of foreign exchange is actually multiplied by a konstansta, this translation method to maintain its financial results and the original relation (eg financial ratios) in the consolidated statements of individual entities that are consolidated. Only the form of overseas estimates, not the essence, the change in the method of exchange rate policies.
    Although interesting and conceptually simple, the method of exchange rate policies were blamed by some people because it undermines the basic purpose of the consolidated financial statements, that is because it presents, for the benefit of shareholders of the parent company, operating results and financial position of the parent company and firms from the perspective of children the single currency. maintain the parent company’s reporting currency as the unit of measurement. In the prevailing exchange rate method, the results will reflect the consolidation of perspekfif-exchange perspective of each country where companies are children. For example, if an asset dip = roleh an overseas subsidiary company for when the rate was 1.000 VA VA 1 = $ 1, then from the perspective of historical cost dollars is $ 1,000; from the perspective of local currency is also $ 1000. If the exchange rate changed to VA 5 = $ 1, the historical cost of those assets from the perspective of the dollar (translas’ historical cost) remains $ 1,000. If the local currency will be retained as the unit of measurement, will be expressed nifai assets of $ 200 (exchange rate translation effect).
    Rate method applies also to blame because it assumes that all assets are influenced by local-currency exchange rate risk (ie, assuming that the fluctuations in the domestic currency equivalent, which is caused by fluctuations translational running, an indicator of changes in the intrinsic value of those assets). Hat is rarely true because the value of inventory and fixed assets in foreign countries are generally supported by local inflation.
    2. Multiple Rate Methods
    Methods of combining multiple exchange rate exchange rate historically runs and in the process of translation. 3 Such methods are discussed below.
    Force-historical method. Based on the true-historical approach, which is popular in the U.S. and other places before the year 1976, current assets and current liabilities of a subsidiary abroad are translated into the reporting currency using the exchange rate of its parent company applies. Assets and liabilities are non-smooth translated with historical rates.
    Items of income statement, except for depreciation and amortization, are translated at the exchange rate on average each month of operation or on the basis of the weighted average of the entire period to be reported. Depreciation and amortization are translated using historical exchange rates prevailing at the time of the relevant asset is obtained.
    This methodology is, unfortunately, has some drawbacks. For example, this method is less choose a conceptual justification. Existing definitions of assets and liabilities and non-current classification does not explain why such a manner which will determine the exchange rate used in the process transiasi.
    Monetary-nonmonetary method. As with any true-historical method, the method moniter using pattern-classification of non-monetary balance sheet to determine the appropriate exchange rate translation.
    Due to monetary items in cash settled; usage rate applicable to translate the items of foreign exchange domestic currency equivalent yield that reflects the realizable value or value of the solution.
    Temporal method according to the temporal approach, translational currency conversion is a process of measurement (ie, repeated presentation of a particular value). Therefore, this method can not be used to change the attributes of an item that is being measured; this method can only change the unit of measurement. Balance of foreign currency translation, for example, just change the (restate) the denomination of inventory. not the actual assessment. In U.S. GAAP, assets are measured based on jumiah cash on hand at the balance sheet date. Receivables and payables expressed in a number expected to be received or paid at maturity. Liabilities and other assets are measured at the prevailing price when the item is acquired or item ¬ occurs (historical price). Even so, some of which are measured by the prices prevailing at the date of financial statements (the price goes), such as inventory under the rules of cost or market. In short, there is a dimension of time associated with the values of this money.
    By Lorensen, the best way to maintain accounting bases are used to measure these items is to translate the foreign currency amount of foreign currency at the exchange rate prevailing on the date of the measurement of foreign currency takes place. Temporal principle thus stated that
    cash, receivables, and payables are measured at the promised amount should be translated using the exchange rates prevailing at balance sheet date. Assets and liabilities are measured at the price of money should be translated using the exchange rates prevailing on the date with respect to the price of money.


  1. Evaluating and selecting the best method according to business conditions and money market?
    Evaluation and selection of foreign currency translation method.
    Method of currency conversion
    Known around the world at least 4 different types of currency conversion methods, namely:
    1. Current methods / Non-current
    This method is the oldest method of currency conversion methods. With this method, all assets and liabilities of the branches lancer converted in the currency of the company’s country of origin at current exchange rates, the exchange rate at the balance sheet drawn up. Being assets and noncurrent liabilities (noncurrent), such as depreciation cost, converted at the historical exchange rate, the exchange rate at the time when the asset acquired or liability occurs. Therefore, branches of overseas companies which have a positive working capital valued in local currency will increase the risk of loss (translation loss) due to the devaluation of the method of current / non current. Instead of working capital turns negative when assessed in the local currency means that there are advantages (translation gain) due to revaluation of the method.
    However, this method does not consider the economic element. Using year-end exchange rate to translate current assets implies that cash, receivables, and inventory in a foreign currency are both facing exchange rate risk. This is certainly not appropriate. In contrast, translation of long-term debt based on historical exchange rates shift the influence of fluctuating currency into the year of completion.
    2. Methods Monetary / non-monetary
    Monetary assets (mainly cash, marketable securities, accounts receivable, and long-term receivables) and liabilities (especially debt and long-term debt) converted at current exchange rate. Being non-monetary items, such as the stock of goods, fixed assets and long-term investment, converted at the historical exchange rate.
    The posts in the profit / loss is converted to the average rate during the period, except for the postal receipts and the costs associated with non-monetary assets and liabilities. Depreciation costs and cost of sales is converted at the rate equal to the balance sheet heading. As a result, cost of sales could have been converted to a different exchange rate with the rate used to convert sales. It should be noted that the monetary-nonmonetary method depends on the balance sheet classification scheme for determining the appropriate exchange rate translation. This can produce inaccurate results. This method will also distort the profit margin for sales compare based on price and exchange rate translation is now at a cost of sales are measured at cost and historical exchange rate translation.
    3. Temporal method
    By using the temporal method, currency translation is a process of re-conversion of the measurement or presentation of a certain value. The method does not change the attributes of an item being measured, malainkan just change the unit of measurement. Translation of these balances in foreign currency re-denomination of measurement causes the outposts, but not the actual assessment.
    This method is a modification of the method of monetary / non monetary. The difference, in the method of monetary / non monetary, stock (inventory) is always converted to the historical exchange rate. Being the temporal method, inventory is generally converted to the historical exchange rate, but may be converted at current exchange rates when the inventory is recorded in the balance sheet with its market value. Theoretically, the temporal method evalusai more emphasis on cost (historical or market).
    The posts in the profit / loss is generally converted to the average rate in the reporting period. Moderate cost of sales, installment debt, and depreciation related to the balance sheet items are converted at the exchange rate histories (rates in the past).
    4. Current rate method
    This method is the easiest method because all of the post balance sheet and profit / loss is converted at current exchange rates. This method is recommended by the Institute of Accountants England, Scotland, and Wales, and is widely used by British companies. With this method, when assets exceed liabilities denominated in foreign currency in foreign exchange, a devalusai will result in losses. Variations of this method is to convert all assets and liabilities, except for net fixed assets are stated at current exchange rates.
    Transactions in foreign currency
    The main characteristic of a particular foreign currency transactions are penyelesainnya influenced in a foreign currency. Thus, transactions in foreign currency occurs when a company buys or sells goods to the payments made in a foreign currency or when companies borrow or lend in foreign currencies.
    A foreign currency transactions can be denominated in one currency, but the measured or recorded in other currencies. To understand why this is happening, petimbangkanlah first term functional currency. Functional currency of a company is defined as the currency of the primary economic environment in which firms operate and generate cash flow. If a foreign subsidiary operations relative stand-alone and integrated in a foreign country (ie sutau subsidiaries that produce products for local distribution), will generally produce and spend money in local currency (countries of residence). Thus the local currency (eg euros for children perusahaandari a U.S. company located in Belgium) is the functional currency.
    To illustrate the difference between a transaction that is denominated in a currency, but measured in other currencies, eg, a U.S. subsidiary in Hong Kong to buy stock of merchandise from the People’s Republic of China paid in renmimbi. Subsidiary’s functional currency is U.S. dollars. In this case, the subsidiary will measure foreign currency transactions are denominated in renmimbi into U.S. dollars, the currency used in the record book. From the standpoint of the parent companies, subsidiaries liabilities denominated in renmimbi, but measured in U.S. dollar functional currency, for the purposes of consolidation.


  1. Understanding the relationship between the foreign currency translation and inflation?
    The use of the exchange rate is now to translate the cost of non-monetary assets are located in berinflasi environment will ultimately lead to an equivalent value in domestic currency is much lower than the initial baseline measurement. At the same time, earnings will be much larger translated with respect to load depresisasi which is also lower. The translation as it can be more easily mislead readers as to give information to the reader. Assessment of the lower dollar typically lower earnings power akutal of foreign assets which are supported by local inflation and the ratio of return on investment that affected inflation in a foreign operation may create false expectations on future profits.
    FASB rejected before the inflation adjustment process of translation, because the adjustment is not inconsistent with the historical cost basis of the assessment framework used in the basic financial statements in the U.S.. As a solution FAS No. 52 requires the use of the U.S. dollar as the functional currency for those residing overseas operations with hyperinflation environment. This procedure will maintain a constant value of the dollar equivalent of foreign currency assets, because these assets will be translated according to the historical rate. The imposition of losses on fixed assets in the translation of foreign currency to equity shareholders will cause a significant effect on financial ratios. Foreign currency translation problem can not be separated from the problem of accounting for foreign inflation.



  1. Understanding financial statements have the potential to mislead during the period of price changes?
    Misleading statements financial potential Professionalism became the main requirement for an external auditor. To support his professionalism as a public accountant auditor in performing the audit should be guided by the auditing standards set by the Indonesian Institute of Accountants (IAI), namely:
    (1) general standards, (2) Field Work Standards, and (3) reporting standards.
    Where private and public standards related to auditor requirements and quality work. While the standard of field work and reporting standards set auditor in terms of data collection and other activities undertaken during an audit and require the auditor to prepare a report on the financial statements diauditnya as a whole. In carrying out its audit work, auditors aim to obtain objective evidence that the auditor may express his opinion in an audit report (Audit Report) which contains about the fairness of the financial statements are audited by the auditor.
    The financial statements are the responsibility of corporate management and needs to be audited by an external auditor who is an independent third party, such as:

    (1) The financial statements contain no possibility of either an intentional misstatement or not,

    (2) The financial statements audited and received unqualified opinion (unqualified) is expected by users of financial statements can provide confidence that the financial statements can be protected from material misstatement. That is, although in the financial statements are misstated (but not very influential) the misstatement is considered to be reasonable so that it can be presented in accordance with accounting principles accepted by the public (Arrens and Loebbecke, 1996).

    The results of audits conducted by auditors required by the users of financial statements that have different interests. A certified public accountant in performing an audit of financial statements do not work solely for the benefit of his clients, but also to other interested parties on the financial statements audited. In order to maintain the trust of clients and from other users of financial statements, public accountants are required to have sufficient competence (Herawaty and Susanto, 2008).

    At this time the need for auditor services as an independent party that is considered inevitable, it becomes a major requirement for the users of financial statements to make decisions. Picture of someone in the profession of professional external auditors by Hall (1968) in Wahyudi and Mardiyah (2006) represented by five things: dedication to the profession, social obligations, independence, confidence in the profession, and relationships with colleagues.

    Significant relationship exists between the level of dedication, the materiality according Hastuti, Indarto, Susilawati (2003) in which the dedication, the dedication to professionalism is reflected from using the knowledge and skills possessed. This attitude is an outpouring of self-expression of the total of the work. Social obligation is defined as a view of the importance of the role of the profession and the public good benefits as well as professionals because of the work according to Hastuti, Indriarto, Susilawati (2003). Research results show that the social obligation significant effect on the level of materiality. As for the independence, confidence, and relationships with colleagues also showed significant results with the level of materiality (Hastuti et al., 2003) in which the independence is intended as a professional view of someone who should be able to make their own decisions without pressure from other parties (government, clients , they are not members of the same profession).

    Confidence in the profession is defined as a belief that the ultimate authority for assessing the work of fellow professionals is a profession, not outsiders who have no competence in the field of science and work. While the relationship with colleagues interpreted by using the bond as a reference profession including formal organizations and informal groups of colleagues as the main idea in the work. With the additional number of input will add to the knowledge that the auditor may be prudent in planning and consideration in the process of auditing.

    Finance Minister Sri Mulyani Indrawati, since early September 2009 until now has set the license suspension sanction to the eight public accounting (AP) and a public accounting firm (KAP). Ministry of Finance in the announcement received here on Saturday, said the license suspension sanctions were based on the Regulation of the Minister of Finance No.17/PMK.01/2008 Services Certified Public Accountants. One of Certified Public Accountants (AP) which is sanctioned Drs.Hans Makarao Burhanuddin. Are concerned shall be liable to suspension for three months due to not fully comply with the Auditing Standards (SA) – Certified Public Accountants Professional Standards (SPAP) in the implementation of a general audit of financial statements PT. Samcon year 2008, which was considered a potentially significant impact to the Independent Auditor’s Report.

    In performing its duties, the Public Accounting Firm shall comply with the norms that apply to all auditors. One of the things that need to be considered by the auditor is the ability to meet client satisfaction by improving the quality of audit. This is necessary because according to Widagdo et al (2000) there are 12 aspects of concern in the audit quality is associated with client satisfaction. Clients will be satisfied with the work of public accountants if the public accountant has experience auditing, responsive, and does the job on time. The users of financial statements put so much faith in the work of public accountants to audit the financial statements. Great confidence is what ultimately requires the auditor to audit the quality attention it generates. This is a demanding responsibility auditors should bias scrutinize financial statements of his client, of course, based on generally acceptable accounting principles. Examples of cases affecting the Bank Century case, the case is a distortion made by Bank Century to the Financial Statements are issued. Financial Statements issued by Bank Century was considered misleading material contains so many errors. Here the role of auditor is required to examine those statements. BPK audit results of the Century is considered misleading, among others, due to audit the State Audit includes “sin” LPS (LPS), which has not officially set a calculation of the estimated cost of the overall handling of Century Bank. This can arise because of the omission of information material fact, or a false statement of material fact.

    In order to achieve a better quality of course one thing to consider is the level of materiality. Materiality level set by the auditor has a role to the examination results. Determination of materiality helps auditors plan the gathering of evidence is sufficient. If the auditor set a low number, it will be more material evidence to be collected. Materiality at the financial statement is the minimum amount of overall misstatement in a financial statement that is significant enough to make the financial statements are not fairly presented in accordance with accounting principles generally accepted. In this context, the usual misstatements caused by a wrong application of accounting principles, does not correspond with the facts, or because the loss of important information (Hary, 2001). For example, if the auditor believes that misstatements overall, amounting to roughly $ 100,000,000.00 would give a material effect on income accounts, but only materially affect the balance sheet when reached Rp 200,000,000.00 was not sufficient for him to designing audit procedures that can be expected to detect misstatements which amounts to only Rp 200,000,000.00 (Hastuti et al., 2003).


  1. Knowing the term – inflation accounting terms and understand the effect of price adjustments to the financial statements?
    Accounting for Inflation
    In economics, inflation is a process of rising prices in general and persistent (continuous) associated with the market mechanism that can be caused by various factors, among others, private consumption increased, excess liquidity in the market that triggered the consumption or even speculation , up to including the launch due to lack of distribution of goods.

    In other words, inflation is also a process of declining currency value continuously. Inflation is the process of an event, rather than the high-low price levels. That is, the higher the price level that is considered not necessarily indicate inflation. Inflation is an indicator to see the changes, and is considered to occur if the price increase takes place continuously and mutually influence affect. Inflation term is also used to mean an increase in money supply which is sometimes seen as the cause of rising prices. There are many ways to measure the rate of inflation, the two most commonly used is the CPI and the GDP Deflator.

    Inflation can be classified into four categories, namely inflation is mild, moderate, severe, and hyperinflation. Mild inflation occurs when prices were below the 10% a year; inflation was between 10% -30% a year; weight of between 30% -100% a year; and hyperinflation or uncontrollable inflation occurs when prices are above 100% a year.


    Inflation can be caused by two things, namely the pull of demand (excess liquidity / money / medium of exchange) and the second is the pressure (pressure) production and / or distribution (lack of production (product or service) and / or also include the lack of distribution). [ citation needed] For the first cause is more affected than the state’s role in monetary policy (Central Bank), while for the second reason is more affected than the state’s role in policy executor in this case held by the Government (Government) as of fiscal (tax / fee / incentive / disincentives), infrastructure development policies, regulations, etc.. Demand pull inflation (Ingg: demand pull inflation) occurs due to excessive total demand which is usually triggered by a flood of liquidity in the market resulting in high demand and lead to changes in price levels. Increased volume of exchange or liquidity associated with the demand for goods and services resulting in increased demand for factors of production.

    Increased demand for factors of production that then leads to the input price increases. Thus, inflation occurs because of an increase in total demand as the economy is concerned in a situation of full employment dimanana stimulation usually caused by an excessive volume of market liquidity. The flood of liquidity in the market are also caused by many factors other than the main course, the ability of central banks in regulating the circulation of money, central bank interest rate policy, to the speculation that occurred in the financial industry.

    Cost push inflation (Ingg: cost push inflation) are the result of the scarcity of production and / or also include the scarcity of distribution, although the demand in general no changes were significantly increased. The existence of non-launch flow or reduced production of this distribution are available from the average normal demand could lead to price increases in accordance with the enactment of the law of demand-supply, or because the formation of the new position of economic value to the product due to the pattern or distribution of a new scale. Reduced its own production can result from many things such as a technical problem at the source of production (factories, plantations, etc.), natural disasters, weather, or shortages of raw materials to produce they will be, speculation (hoarding), etc., leading to production shortages The relevant market. So did the same thing can happen to the distribution, which in this case the infrastructure factor plays a crucial role.

    Increased production costs due to 2 things, the price increase, for example, raw materials and increase in wages / salaries, eg civil servants salary increases will result in private efforts to raise the price of the goods.


    Based on the origin, inflation can be classified into two, namely inflation and the sources of domestic inflation from abroad. Sources of domestic inflation such as occurred due to budget deficits financed by printing new money and market failures that result in food prices to be expensive. Meanwhile, inflation from abroad is the inflation that occurred as a result of rising prices of imported goods. This could occur due to the cost of producing goods overseas is high or the rate increase of imports of goods.

    Inflation can also be divided by the amount of coverage of the effect on prices. If the price increases that occurred only concerned with one or two specific items, inflation is called inflation closed (Closed Inflation). However, if the price increases occurred in all the goods in general, inflation is referred to as open inflation (Open Inflation). While inflation is so great when the attack so that every time the prices constantly changing and increasing, so people can not hold money for longer because the value of money continues to decline so-called runaway inflation (hyperinflation).

    Based on the severity of inflation can also be distinguished:

    A. Mild inflation (less than 10% / year)

    2. Inflation is moderate (between 10% to 30% / year)

    3. Severe inflation (between 30% to 100% / year)

    4. Hyperinflation (more than 100% / year)

    Measuring inflation

    Inflation is measured by calculating the change in the percentage change in a price index. Among the price index: consumer price index (CPI) or the consumer price index (CPI), is an index that measures the average price of certain goods purchased by consumers. Cost of living index or the cost-of-living index (coli).

    The producer price index is an index that measures the average price of the goods required manufacturers to conduct production process. IHP is often used to predict the level of CPI in the future due to changes in raw material prices increase the cost of production, which then will increase the price of consumer goods. Commodity price index is an index that measures the prices of certain commodities.

    Price index of capital goods

    GDP deflator shows the magnitude of price changes of all new goods, locally produced goods, finished goods, and services.


    Workers with fixed salaries are very disadvantaged by the presence of inflation. Inflation has both positive and negative effects of severe, depending on whether or not inflation. If inflation is mild, it has a positive influence in the sense that can stimulate the economy better, which is increasing the national income and make people eager to work, save and invest. Conversely, in times of severe inflation, which in the event of uncontrolled inflation (hyperinflation), the state of the economy into chaos and felt sluggish economy. People become excited about working, saving, or investments and production because prices are rising rapidly. The recipients of fixed incomes such as public servants or private employees and the workers will be overwhelmed to bear and keep their prices so that life becomes increasingly degenerate and collapsed from time to time.

    For people who have a fixed income, inflation is very detrimental. We take the example of a retired civil servant in 1990. In 1990, enough retirement money to make ends meet, but in the year 2003-or thirteen years later, the purchasing power of money may be only a half. That is, the pension is no longer enough to make ends meet. Conversely, people who rely on income

    based benefits, such as employers, are not harmed by inflation. So it is with employees who work in firms with payroll following the inflation rate.

    Inflation also causes people reluctant to save because of the currency goes down. Indeed, the savings earn interest, but if the interest rate above inflation, the value of money is still declining. When people are reluctant to save money, business and investment to flourish. Because, to grow the business needs of bank funds obtained from private savings.

    For people who borrow money from the bank (debtor), inflation is beneficial, because at the time of payment of debts to creditors, the value of money is lower than at the time of borrowing. Instead, the lender or the lenders will lose money because the value of money return is lower than at the time of borrowing.

    For manufacturers, inflation can be profitable if the income is higher than the increase in production costs. When this occurs, manufacturers will be forced to double its production (usually occurs in large employers). However, when inflation led to rising production costs and eventually harm the producers, the producers are reluctant to continue production. Manufacturers to stop production for a while. In fact, if not able to keep pace with inflation, the business may be insolvent manufacturers (usually occurs in small businesses).

    In general, inflation can result in reduced investment in a country, pushing up interest rates, encouraging speculative investments, the failure of the implementation of development, economic instability, balance of payments deficit, and declining living standards and welfare of the community.

    The role of central bank

    The central bank plays an important role in controlling inflation. The central bank of a country are generally trying to control the rate of inflation at a reasonable rate. Some central banks have even an independent authority in the sense that the policy should not be interfered by outside parties, including government-central bank. This is because a number of studies suggest that a less independent central banks caused one of the government intervention that aims to use monetary policy to stimulate the economy – will push inflation higher.

    Central banks generally rely on the money supply and / or interest rate as an instrument in controlling prices. In addition, the central bank is also obliged to control the exchange rate of the domestic currency. This is because the value of a currency can be internal (reflected by the rate of inflation) and external (exchange rate). When this pattern is applied by many inflation targeting central banks around the world, including by Bank Indonesia.


  1. Determine differences in the cost accounting model and the conventional current?
    Historical Cost Financial Statements of Financial Position

    1. Amount in the statement of financial position are not expressed in the units of measurement are now at the end of the reporting period, are restated by applying a general price index.

    2. Items of monetary restated because they are expressed in monetary units is now at the end of the reporting period. Monetary posts are owned and the money to be received or paid in cash.

    3. Assets and liabilities, with the agreement, which is connected with changes in prices such as index linked bonds and loans, adjusted in accordance with the agreement to ensure the balance at the end of the reporting period. The posts are recorded at amounts have been adjusted in the statement of financial position are restated.

    4. All assets and other liabilities are nonmonetary. Some noted the number of non-monetary post is now at the end of the reporting period, such as net realizable value and fair value, then the post is not restated. All assets and liabilities to other non-monetary restated.

    5. Most of the non-monetary items carried at cost or cost less depreciation. Therefore, these items are stated at the amount present on the date of acquisition. Acquisition cost, or cost less depreciation, which are presented back to each item is determined by applying the change in the general price index from the date of acquisition until the end of the reporting period on a historical cost and accumulated depreciation. For example, fixed assets, inventories of raw materials and merchandise, goodwill, patents, trademarks and similar assets are restated from the date of purchase. Supply of intermediate goods and finished goods are restated from the date of the purchase cost and conversion costs.

    6. Detailed record of the date of acquisition of units of fixed assets may not be available or can not be estimated. In rare circumstances, it may be necessary, in the first period to implement this statement, to use an independent professional assessment of the value of such units as the basis for the presentation of the return.

    7. General price index may not be available for a period of time restate fixed assets required by this Statement. Under these circumstances, an entity may need to use the basic estimates, for example, the transfer rate between the functional currency and foreign currencies are relatively stable.

    8. Some noted the number of non-monetary post is now on a date other than the date of acquisition or date of statement of financial position, for example, fixed assets have been revalued in the previous date. In this case, the carrying amount restated from the date of revaluation.

    9. Restated amounts of non-monetary items is reduced, in accordance with relevant GAAP, when the amount exceeds the recoverable amount. For example, the amount of fixed assets, goodwill, patents and trademarks presented again reduced to recoverable amount and restated amount of inventory reduced to net realizable value.

    10. Investee is recorded using the equity method may make a report in the currency hyperinflation economy. Statement of financial position and reports comprehensive income of the investee are restated in accordance with this Statement for the investor counting on net assets and profit and loss. When the financial statements of the investee are restated denominated in foreign currencies, the financial statements are translated at the closing exchange rate.

    11. Effect of inflation is usually recognized in borrowing costs. It is not appropriate to restate the capital expenditure financed by borrowing and to capitalize the borrowing costs to compensate for inflation over the same period. Part of this borrowing costs are recognized as an expense in the period when the cost occurs.

    12. An entity may acquire assets in a deal that allows entities to defer payment without incurring an explicit interest charge. When an entity is not practical to determine the amount of interest, then such assets are restated from the date of payment and not the date of purchase.

    13. At the beginning of the first period of application of this, a component of equity, except retained earnings and revaluation surplus, are restated using general price index from the date of the equity component is contributed or appear. Revaluation surplus that arose in previous periods is eliminated. Balance restated earnings from all other amounts in the statement of financial position

    14. At the end of the first period and subsequent periods, all components of equity are restated by applying a general price index from the beginning of the period or the date of contribution, if more recent. Shift in owners’ equity during the period disclosed in accordance with IAS 1 (revised 2009):

    Presentation of Financial Statements. Comprehensive Income Statement
    This statement requires that all items in comprehensive income statement are expressed in units of measurement are now at the end of the reporting period. Therefore, the entire amount necessary to implement the changes and display it in the general price index from the date income and expenses were initially recorded in the financial statements.
    Gain or Loss on Net Monetary Position
    In an inflationary period, if the entity has a monetary assets exceed monetary liabilities, the entity’s purchasing power decreases, and if the entity has a monetary liabilities exceed monetary assets, then the purchasing power is increasing all the entities connected to a price level. Monetary position gain or loss is the difference in net non-monetary assets, and equity items in the comprehensive income statement are restated and the adjustment of index linked assets and liabilities. Gains or losses can be estimated using changes in the general price index to the weighted average over the period of the difference between monetary assets and monetary liabilities.
    Gains or losses net monetary position is included in the income statement. Adjustments to assets and liabilities linked to price changes in the agreement) in accordance with paragraph 13, with the offsetting gain or loss on net monetary position. Income and other expenses, such as income and interest expense and foreign exchange differences related to investments or loans, are also associated with the net monetary position. Although the post is separately disclosed, it can be helpful if the post is presented along with the gain or loss on net monetary position in the comprehensive income statement.

    Now the Cost of Financial Statements Statements of Financial Position
    Items that are presented at current cost are not restated because they are expressed in units of measurement are now at the end of the reporting period. Elsewhere in the restated statement of financial position in accordance with paragraphs 11 to 24.

    Comprehensive Income Statement

Comprehensive income statement using the current cost, before restatement, generally reports costs are now at the time of the underlying transactions or events. Therefore, the entire amount is to be presented again in the unit of measurement is now at the end of the reporting period by using a general price index.

Gains or losses Net Monetary Position
Gains or losses are recorded net monetary position in accordance with paragraphs 26 and Statement of Cash Flows
This statement requires that all items in the cash flow statement are expressed in units of measurement are now at the end of the reporting period.

Related Figures
Corresponding number in the previous reporting period, whether based on a historical cost approach or a current cost approach, are restated using general price index, so the comparative financial statements are presented in units of measurement are now at the end of the reporting period. Information disclosed in connection with previous periods is also expressed in units of measurement are now at the end of the reporting period. For the purpose of presenting comparative amounts in the presentation of foreign currency, applied IAS 10 (revised 2010): Effects of Changes in Foreign Exchange Rates paragraph 42 (b) and 43.

Consolidated Financial Statements
The parent entity financial reports in the currency hyperinflation economy may have subsidiaries that also make a report in the currency hyperinflation economy. Entity’s financial statements are restated the child’s needs by using the general price index of the country whose currency is reported prior to inclusion in the consolidated financial statements issued by the parent entity. When a foreign subsidiary is an entity, then the restated financial statements are translated at the closing exchange rate. Entity’s financial statements were reported in children who are not hyper-inflation economy currencies are treated according to Foreign Exchange.

If financial statements with a different end of the reporting period are consolidated, all monetary and nonmonetary post need to be restated in the unit of measurement is now on the consolidated financial statements.


  1. Explain the differences of inflation accounting in the United States, Britain and Brazil?

The United States. Regulations were first introduced to the legal prescribed by the SEC in 1976 (Accounting Series Release 1990) to reveal information replacement costs associated with depreciation, cost of goods sold, fixed assets and inventory. Furthermore, in 1979, the FASB issued SFAS No. 33 (Statement of Financial Accounting Standard – 33), entitled “Financial Reporting and Changing Prices”.
England. Accounting profession introduced SSAP 16 (Statement of Standard
Accounting Practice – 16), “Accounting for Costs Now” in 1980,
where the needs of current cost accounting financial statements either as additional reports as well as the main report. Provided that the historical cost reports must be provided. However, SSAP 16 was officially withdrawn in 1988 following the rejection rate of inflation and criticism of the business. At the same time, many companies to reevaluate periodically the land and buildings at their market value (estimated output or sales price).
In Brazil, accounting for inflation used in the early 1950s, but the law
In 1976 a new company to make adjustments, the company presents a re-account – an account of fixed assets and shareholders’ equity by using a price index which is recognized by the government to measure the local currency devaluation.


  1. Understanding the financial peloporan in the calculation of hyperinflation?
    Financial reporting in economic hyperinflation Statement of Financial Accounting Standard 63: Financial Reporting in Hyperinflation Economic consists of paragraphs 1-40. The entire paragraph has the power to set the same. Paragraphs which are printed in bold and italics to set the main principles. IAS 63 should be read in the context of goal setting and the Framework of the Preparation and Presentation of Financial Statements. IAS 25 (revised 2009) Accounting Policies, Changes in Accounting Estimates and Errors provides a basis to select and apply accounting policies when no explicit guidance. This statement is not intended to apply to elements that are not material

    01. This statement is applicable to the financial statements, including the consolidated financial statements of each entity that functional currency is the currency of an economy experiencing hyperinflation (hereinafter referred to as hyper-inflation economies).

    02. Hyperinflation in the economy, reporting of operating results and financial position in the local currency without restatement is not useful. Money loses purchasing power such that the ratio of the amounts of transactions and other events from time to time, even within the same accounting period, be misleading.

    03. This statement does not set at a certain level of inflation is considered hyperinflation. Consideration is required in determining when restatement of financial statements need to be done in accordance with this statement. Characteristics of the economic environment of a country which is an indication that the country is experiencing hyperinflation, among others: (a) inhabitants prefer to store their wealth in the form of non-monetary assets or in a foreign currency is relatively stable. Amount of local currency held immediately invested to maintain purchasing power; (b) the population consider the monetary amount is not in the local currency but in foreign currencies are relatively stable. The prices may dikuotasikan in foreign currency; (c) the prevailing price in the sales and purchases on credit is determined by inserting a factor expected loss of purchasing power during the credit period, even if the short loan period, (d) interest rates, wages and prices associated with the price index, and (e) the cumulative inflation rate over three years approaches or exceeds 100%.

    04. All entities that prepare financial statements in the currency of the same hyper-inflation economies are encouraged to apply this statement from the same date. However, this statement is applied to the financial statements of each entity since the beginning of the reporting period when the entity identifies the existence of hyperinflation in the country whose currency is used by such entities to prepare financial statements.

    05. Price change from time to time as a result of political influence, economic, social and general or specific. Specific influences such as changes in supply and demand and technological changes may cause individual prices increase or decrease significantly and independently from one another. In addition, the general effects can cause changes in general price levels and purchasing power of money.

    06. Entities that prepare financial statements on the basis of historical cost accounting do so without considering changes in general price level or a specific price increase of a recognized asset or liability. An exception to this principle is applied to the assets and liabilities as required, or elected, to be measured at fair value. For example, fixed assets are revalued at fair value. However, some entities present the financial statements based on current cost approach that reflects the impact of changes in specific prices of assets.

    07. Hyperinflation in the economy, financial statements, either prepared on the historical cost approach and cost approach now, it will only work if it is expressed in units of measurement that applies at the end of the reporting period. Therefore, this statement is applied to entities that provide financial statements denominated in hyperinflation economy. Entities are not allowed to present separate financial statements are not restated, although attaching the information required by this Statement.

    08. Entity’s financial statements that functional currency is the currency hyperinflation economy, based on historical cost approach or a current cost approach, are presented in units of measurement that applies at the end of the reporting period. Corresponding figures for the previous period required by IAS 1 (revised 2009) Presentation of Financial Statements and any information in the previous period are also presented in the unit of measurement is now at the end of the reporting period. For the purpose of presenting comparative amounts in a different presentation currency, applied IAS 10 (revised 2010): Effects of Changes.


  1.  Knowing whether constant dollar or current cost is better to measure the effects of inflation?

Now accounting for the cost of dividing the total income into two parts: (1) operating profit (the difference between revenues and expenses are now present resources consumed) and (2) Unrealized gains arising from the ownership of non-monetary assets with a replacement value that increases with with inflation. Although measurements made directly profit ownership, the accounting treatment is not so.
The increase in the cost of replacing the operating assets (ie cash outflows projected higher to replace the equipment) is not an advantage, whether realized or not. If the current cost-based profit measure estimates the company’s assets that could be used, then the change in current cost of inventory, fixed assets and other operating assets are revalued owner’s equity, which is part of the profits to be retained by the company to maintain its physical capital (productive capacity). Assets held for speculation, such as vacant land or marketable securities, do not need to be replaced to maintain productive capacity. Thus, if the adjustment costs now include these items, the increase or decrease in equivalent cost (value) of her present (by as much value can be realized) must be expressed directly in earnings.


  1. Definition of a double dip (double dip) and explains how to handle?

There has been much speculation about the double-dip recession affecting the U.S. economy. In the strategy the Lord Abbett senior economist and market contributed the following guests, Milton Ezrati offers seven reasons why the scenario is not possible.

It seems these days that half the headlines in the financial media fear a double-dip recession, as did half of the conversation on Wall Street. Surely there is a risk, at least in the European financial difficulties. But still, there are reasons to question such widespread concern. History, after all, just offering an experience that is double-dip, and the growth of policy mistakes. More, the actual data on the economy flew in the face of such a view. Here are seven reasons to doubt the view of double-dip.

A. Consumers like the Office of Fair

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Market well enough to avoid a double dip

In about 70% of the economy, American consumers almost always referred to the general track, and here, the picture is one of relative strength. To be sure, the market took it to heart when it reports a few weeks ago showed that retail sales dipped by 1.4% in May. But that was followed by a decline in sales advance 10% stronger in retail sales during the previous 12 months. Whether the consumer does not stop, it will be worried. In the meantime, measures broader-based personal spending has grown considerably throughout. 2.4% annual interest rate of expansion registered for overall spending in May a little slower than the annual rate of 4.2% expansion recorded for the previous six months, but still, it’s not slowing the decline.

More telling fundamentally, household income has increased quite enough to support future spending. Overall personal income increased at an annual rate of 5.4% annually in May (last month where data available), accelerating from 4.4% real annual rate of advance during the previous six months. Meanwhile, the personal savings rate, at 4.0% of income after tax, generating $ 454 billion annual flow of new money from the household to pay the debt even as they maintain the existing level of expenditure. If revenue continues to grow, as it may, the household will have the means to continue that “de-leveraging,” even when they increase spending. All they need do is keep spending from growing faster than state revenue should easily support at least moderate spending growth.

2. Housing Data Are Misleading on Two Sides of the first $ 8,000 homebuyer tax credit has played hob with monthly housing statistics and investor perceptions of the sector’s fundamental strengths. Of course, it’s always silly to suggest, like Washington, that the credit would encourage someone to purchase a house. Even those with the most backward approach to financial problems will resist taking on debt $ 200,000 to save $ 8000 on taxes. But for those who would otherwise buy a house, homebuyer credit can and does affect the time of purchase.

Thus, the first end of the credits approached last November 2009, many people who otherwise look for a new home crowded their purchases to the eligible period. Not surprisingly, buying a home jumped in October and November. But because a lot of hurried sales would have otherwise occurred in December, January, and February, the new purchases in the months fell by more than 12%. Something even more extreme because it is the latest expiration date approached in April 2010. People who are looking crowded their purchases into March and April in order to qualify for the credit, which encourages home sales by nearly 30%. Then, because so many sales will occur after April, the sudden fall of about 30% of sales recorded in May. Housing starts and residential construction put follow the pattern of up-and-down the same.

But none of this says something fundamental about the housing market. There, the more important consideration is the reduction in inventories of unsold homes by 27%, even, during the last 12 months, equivalent to 13 months of supply in times of crisis 2008-2009 for about eight months later supply. These developments have fundamentally previously raised pressure on new construction, sales, and price. According to the National Association of Realtors, for example, the average selling price of homes sold in the United States has risen 5.3% so far this year, and prices continue to rise in May. It will be long before residential real estate a good investment, but the pattern still shows that market prices have been easy to compensate for the rotation about the tax credit.

3. Business spending and strong exports to Dip Is It turns out if the business is anticipating a second dip in the economy, has chosen an odd way to show it. To be sure, companies have held back new construction, not too surprising given the low level of capacity utilization. So far this year, nonresidential construction spending has declined 2.1%, or at an annual rate of 5.0%. However, business managers can not be too scared, because they spend a lot on new equipment. Shipments of capital goods (excluding defense materials) rose at an annual rate of 3.0% during April and May, the same pace they have maintained for 12 months. More telling than the actual shipping expectations, new orders for capital goods such as exploding at an annualized rate of 48.3% outstanding during the period of acceleration is said weak April-May, a remarkable 25% of the already rapid rate of expansion during the previous 12 months.

Meanwhile, the business also has begun to rebuild inventories, perhaps in anticipation of future sales growth. Finished goods inventory on hand increased at an annual rate of 6.0% between March and May (last month for which data are available), and goods in process increase at an annual rate of 4.3%.

Exports also showed strength. So far this year, until April (last month for which data are available), total U.S. exports to the rest of the world has been growing at an impressive annual rate of almost 17%. In April, they jumped at an annual rate of 12.7%. Such growth would not only help spur the U.S. economy as a whole, but also of the opinion that the world economy is much stronger than double-dip arguments suggest. As the taking of U.S. domestic demand, it should be noted that the imports have grown at an annual rate of 23.5% so far this year, a move they are held in April. Clearly, someone in this economy is to buy.

4. Overall Production Levels Look Good Enough, Too more general measure of economic activity is also dubious double-dip view. industrial production, for example, continues to increase at an impressive rate. Level of year-to-date through May (last month in which data are available) have seen this measure the output at factories, mines and utilities rose at an annual rate of more than 8%, and in May, the actual speed is accelerated to an annual rate more than 15% – clearly unsustainable, but quite the opposite drawback, especially double-dip. Similarly, the Purchasing Managers Index (PMI) of the Institute of Supply Management showed continued growth. To be sure, the index fell in May and June (last month where data available), to a level of 56.2 from the April level of 60.4. But because any reading above 50.0 speaks to economic expansion, even the lower figure records continued growth and not another dip. The reality is that the April figures are unsustainably high.

5. No job Threatening Look, I do not know the hour indicator, temporary jobs, and even full-time work began on the edge. And even though the unemployment rate has failed to fall in an integrated manner, such a move would be premature at this stage of recovery, at least considering the average delay in past cycles. Actually, the job market a little earlier than scheduled, according to historical benchmarks.

6. Financial markets are implying Than Is Healthy Despite Headlines European sovereign debt problems led to financial and economic risks are great, as a result, financial markets still showed an impressive resilience. Indeed, their behavior under pressure is talking to healing, fundamentally significant. Contrary to the primary tone, the market has avoided much-seeking relapse into the chaos of 2008-2009. For example, the TED spread (the gap between Treasury bills and interbank rates loans, and a good indicator of liquidity) only widened in this crisis, from 20 basis points (bps) to around 40 bps. Some widening was to be expected in the face of uncertainty in Europe, but this is still a long way from the spread of 460 basis points recorded during the 2008-2009 crisis. Similarly, junk bond spreads have widened, from about 600 bps over Treasuries earlier this year, to 700-750 bps, as European issues have become apparent. Although surprising reaction to the European credit scare, this spread is far from their 2100 bps up to the year 2008-2009. Meanwhile, problems continued to be sold in bond and money markets, bank loans and even has shown some tentative signs of flowing again.

7. China Continues to Grow A slowdown in China not only consensus but also a reasonable expectation. This sort of deflate the housing bubble in the larger cities of China. The government in Beijing has taken steps to slow the monetary and fiscal growth. recent decision to allow Beijing to appreciate the yuan against the dollar in foreign exchange markets has raised questions about the future growth of Chinese exports, both to the United States and Europe.

But despite all the factors are real and will slow the pace of China’s economic growth in general, it would be wrong to exaggerate them. China decline in residential real estate prices almost risk a financial collapse that occurred in the United States about one-half years to two years ago. For one, the debt levels in China are much lower than they are or here. While Chinese households are carrying an average debt of about 40% of revenue, the U.S. debt levels approach 120-130% of revenue. For another, China is usually put 50% down to purchase a house and almost never less than 20%. Exports will not increase very much impact yuan. Currency appreciation is very little and very carefully managed the more cosmetic than real. It is certainly not enough to threaten China’s exports. Broad economic indicators also showed a decrease, rather than decrease. PMI, for example, fell from 53.9% in April to 52.1% in May, but there are still over 50% of the expansion. If, as expected, the overall growth in China slowed to an annualized rate of 11.9% in the first quarter, to 9.5%, will still be faster than the entire world – and almost made the double dips.


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