Six Rules To Memorize Current Rate vs. Temporal Methods
So what are the rules that you use to remember the differences between current rate and temporal methods? I tried reducing these two methods into a minimal set of rules that I can remember (an earlier rule overrides the subsequent ones):
- Common stock: always use historical rate
- Monetary asset/liabilities: always use current rate
- Current rate method: except for rule #1, always use current rate for balance sheet accounts, and average rate for income statement accounts.
- Temporal rate (I) — Revenues and SG&A use average rate, and as a consequence:
- Temporal rate (II) — Net income and Equity are mixed, because Revenues & SG&A use average rate (and COGS use historical rate).
- Temporal rate (III) — everything else use historical rate.
Can you guys come up with more compact rules?