Assignment 5 Essay

June 15, 2015

Dear Mr. Smith:
This responds to your field audit notice on my 2014 Individual tax return (Form 1040). In view of the accusations made by the IRS about my client, I would like to bring to your attention that due diligence has been observed in all aspects and my professional code of conduct was set at the highest standard as set forth in Circular 230. There are some accusations in regard to the method used by my client to value foreign currency exchanges. As much as your office cites incorrectness of the above, with regard to accounting standards, everything has been observed. My clients company has a subsidiary with a small company abroad and the trading currencies differ. In order to value the currency, my client has used the temporal rate translation method.
The accounting standards call for foreign operations to use the temporal, or historical, rate method when the local currency differs from the functional one. For example, a subsidiary of a Canadian company with foreign operations in a small country in which all business transpires in U.S. dollars, not the country’s local currency, would use the temporal method. When you apply the temporal rate method, you adjust income-generating assets on the balance sheet and related income statement items using historical exchange rates from transaction dates or from the date that the company last assessed the fair market value of the account. You recognize this adjustment as current earnings. According to FASB Rule 52, you also apply the temporal rate method if you operate in a hyperinflationary environment. (Bank)
There are also accusations that an undervalued international exchange of appreciated property should show a larger gain. In the opinion of most traders, economists as well the government, I would like to bring to your attention that a currency can only be considered undervalued when its value in foreign exchange is less than it "should" be based on economic conditions, which is not the same in this case. Basing on the dollar trends, we can all agree that there is less demand. This means that the dollar is undervalued despite the fact that the economy is picking up, and therefore my client’s assets have been correctly valued.
There are supporting documents of all the sales that my client has made and revenues that have been

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UNIT 5 ASSIGNMENT 5 Essay