Assume that General Electric (GE)’s current assets are $401 billion, fixed assets are $797 billion, current liabilities are $323 billion, and long-term liabilities are zero.
Calculate GE’s translation exposure using current/noncurrent, monetary/nonmonetary, temporal, and current rate methods. (Hint: You won’t be able to calculate using all the four methods based on given information. If you can’t calculate using a method, state so and include the reason.
How do I make a journal entry for this? There is no set rate and some translation exposure calculations will not be used.
Translation Exposure: Translation exposure refers to the change in the value of the assets, liabilities, equity, and income of an organization due to change in the value of foreign exchange rates. If any organization has its operations in multi national companies, then it denotes some portion of its assets, liabilities, equity, and income in foreign currency, which results in transalation exposure.
Calculation of transalation exposure: With the information provided, we can calculate the transalation exposure.
Reason: Transalation exposure calculation require foreign exchange rate. There is no information regarding the foregin exchange rate.
Journal Entry: As per the information provided we can not prepare journal entries as no exchange rate is provided.
If exchange rate was provided the the journal entries would have as follows:
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