Hughes Inc.’s CFO should follow his assumptions on the financial changes and conduct the appropriate transformations to shift the current balance sheet from the Canadian dollar to the U.S. currency. In this instance, any operations within the balance sheet should be represented with the currency change, as such an approach will assist in avoiding mistakes and increase the readability of the financial reports.
The Financial Accounting Standards Board (FASB) has developed the accounting standards and regulations, which require the review of all operations and conduct the currencies translation on the date that it was made. The Financial Accounting Statement 52 (FAS 52) indicates that the cumulative translation adjustment should stay in the balance sheet (Financial Accounting Standard Board 12). This decision is due to the absence of necessity to adjust balance sheet statements with the currency change (Hoyle et al. 468). The only modification should be in currencies and values, while the equity, liabilities, and assets statements should remain the same.
Another CFO’s idea on the retrospective of balance sheet and transactions is correct, as the shift from one currency to another requires the use of exchange rates, which were accurate on the date the transaction was made. In this case, the equity of operation and money value is preserved (“Foreign Currency Translation: International Accounting Basics”). As a result, the adjusted balance sheet will represent reliable and current data on the financial situation within the company.
The Canadian subsidiary’s nonmonetary assets need to be restated, as their value is shown in Canadian dollars (Hoyle et al. 469). In this instance, they should be converted into U.S. dollars to keep the balance sheet consistent. In return, the representation in the new currency will not change their value; however, it will ease the further financial operations within the company.
From this perspective, the current CFO’s suggestions are following the standard accounting regulations about the functional assets. He should review and analyze the balance sheet to convert one currency into another. The idea is to preserve the value and equity of all transactions disregarding the selected currency.
Financial Accounting Standard Board. “Statement of Financial Accounting Standards No. 52.” Norwalk, Connecticut, 2010, pp. 1-162.
““. Freshbooks, 2020. Web.
Hoyle, Joe Ben, et al. Advanced Accounting. 12th ed., Mcgraw-Hill Education, 2015.