Question #13
Reading: Reading 10 Multinational Operations
PDF File: Reading 10 Multinational Operations.pdf
Page: 7
Status: Correct
Correct Answer: A
Question
An important distinction between the temporal method and the current rate method is that:
Answer Choices:
A. the current rate method results in an adjustment to the equity account on the balance sheet. The temporal method results in a gain or loss appearing on the income statement
B. depreciation and cost of goods sold (COGS) are a function of the current rate under translation (current rate method), but a function of the average rate under remeasurement (temporal method)
Explanation
The current rate method results in an adjustment to the equity account on the balance
sheet. The temporal method results in a gain or loss appearing on the income statement.
Depreciation and COGS are a function of the average rate under the current rate method,
but a function of the historical rate under the temporal method. Monetary assets and
liabilities are use the current rates under both methods.