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.
The purpose of translation is to transform a subsidiary's financial statements, prepared in its functional currency, into the reporting currency of the parent. The purpose of re-measurement is to restate transactions from one currency into the functional currency of the entity.Re-measurement is also required when a subsidiary's financial statements have been denominated in a currency other than the subsidiary's functional currency. 85.he translation of a foreign subsidiary's financial statements is not required in the following two situations: (A.) when the subsidiary's functional currency is the U.S. dollar. (B.) when the subsidiary operates in a highly inflationary economy.