Prophylactic: A preventive measure. The word comes from the Greek for an advance guard, an apt term for a measure taken to fend off a disease or another unwanted consequence. A prophylactic is a medication or a treatment designed and used to prevent a disease from occurring.
Changes in functional currency amounts that result from the measurement process are called transaction gains or losses; transaction gains and losses are included in net income. Foreign currency translation is the process of expressing a foreign entityâs functional currency financial statements in the reporting currency. Translation adjustments are included in the cumulative translation adjustment (CTA) account, which is a component of other comprehensive income.
1 The functional currency is the reporting entityâs in the first case, and the local currency in the later. 2  Proportion of cash flows. 3  Whether cash flows from the foreign operation directly affect the cash flows of the reporting entity, and are available for remittance. The functional currency is the reporting entityâs if so, and the local currency if not. 2  Debt service. 3  Whether a foreign operationâs cash flows can service its debt obligations without funds transfers from the reporting entity.