A Classified Balance Sheet
"Classified" means that the balance sheet accounts are presented in distinct groupings, categories, or classifications. Most accounting balance sheets classify a company's assets and liabilities into distinct groups such as current assets property, plant, equipment, current liabilities, etc. These classifications make the balance sheet more useful
The Temporal Method
Cash, receivables, and liabilities are re-measured into U.S. dollars using the current exchange rate. Inventory, property, equipment, patents, and contributed capital accounts are re-measured at historical rates resulting in differences in total assets and liabilities plus equity which must be reconciled resulting in a re-measurement gain or loss.
If a company's functional currency is the U.S. dollars, then any balances denominated in the local or foreign currency, must be re-measured. Re-measurement requires the application of the temporal method. The re-measurement gain or loss appears on the income statement .
Temporal Classification
Re-measurement to U.S. dollars.
Translation
A method of foreign currency translation that uses exchange rates based on the time assetsand liabilities are acquired or incurred, is required. The exchange rate used also depends on the method of valuation that is used. Assets and liabilities valued at current costs use the current exchange rate and those that use historical exchange rates are valued at historical costs.
By using the temporal method, any income-generating assets like inventory, property, plant, and equipment are regularly updated to reflect their market values. The gains and losses that result from translation are placed directly into the current consolidated income. This causes the consolidated earnings to be volatile.