Glossary 641Tax-adjusted nonrecurring items:Pretax nonrecurring items of revenue, gain,
expense, and loss that are multiplied by one minus a representative income tax rate.
The result is the after-tax effect of each of these items on net income.
Tax-free transaction:An acquisition in which the primary consideration paid to
the target’s shareholders is the acquirer ’s common stock, thereby deferring capital
gains taxes until the new shares are sold.
TCP/ IP: The communications standard that is used by the Internet. A protocol is
the understanding that computers have for how information will be delivered over
the communications network, which enables computers with different operating sys-
tems to communicate with each other and to eliminate errors in data.
Temporal (remeasurement) translation procedure:A method for translating
foreign currency financial statements in which monetary assets (including assets
valued at market) and liabilities are translated at current exchange rates. Nonmone-
tary assets, liabilities, and paid-in capital accounts are translated at historical ex-
change rates; cost of sales and depreciation expense are translated at the rates in
existence when the related inventory or fixed assets were acquired; and revenues
and other expenses are translated at the average exchange rate in existence during
the reporting period. Translation gains and losses are reported as a component of
net income.
Transaction exposure:The potential for gains and losses as foreign-denominated
assets and liabilities (e.g., accounts receivable, accounts payable, notes payable), in-
crease or decrease in value with changes in exchange rates.
Transfer prices:Prices charged when goods or services are transferred either
within firms (e.g., from one division of a firm to another) or between related firms
(e.g., between a parent and its subsidiaries).
Translation exposure: Typically, the excess of foreign-currency assets over foreign
currency liabilities of foreign subsidiaries. Translation gains result from increases in
the value of the foreign currency and losses in the event of decreases.
Translation of foreign currency financial statements:The restatement of the
financial statements of a foreign entity from its local currency to the reporting cur-
rency of its parent.
UNIX:An open operating system running on many manufacturers’ computers. The
first successful nonproprietary operating system. It was developed by Bell Labs in
the 1970s.
Unsystematic risk:The portion of total risk specific to an individual security that
can be avoided through diversification.
Unwind:To close out a future or for ward position.
URL:Universal Resource Locator is the Internet address for a given Web site. The
URL for the president of the United States is http://www.whitehouse.gov.
Valuation date:The specific point in time at which the valuator ’s opinion of value
applies (also referred to as “Effective Date” or “Appraisal Date”).
Variances:Measures of the difference between actual costs and standard costs.
They are favorable if costs are less than expected and unfavorable other wise. Vari-
ances may be analyzed by the effect of changing prices (price variances) or changing
usage (quantity or usage variances).