Question #40 - Reading 10 Multinational Operations

Reading: Reading 10 Multinational Operations

PDF File: Reading 10 Multinational Operations.pdf

Page: 22

Status: Correct

Correct Answer: A

Shared Context

- Hirauye is working on consolidating the financial statements of Molsan Industries' Japanese subsidiary. Under SFAS 52, regarding Foreign Currency Translation, if: A) more than half of the subsidiary's revenue is from Japanese sources, then the results of the Singapore operation are translated into Japanese yen and then translated into Canadian dollars. B) management determines that the subsidiary's functional currency is the Japanese yen, the results of the Singapore operation are first remeasured into Japanese yen and then translated into Canadian dollars. C) management determines that the subsidiary's functional currency is the Singapore dollar, then the results of the Singapore operation are remeasured into Canadian dollars.

Question

Ortiz had told the junior analysts to make sure they understand the different accounting rules under SFAS 52. When referring to foreign exchange rates, the difference between remeasurement and translation is that remeasurement:

Answer Choices:

A. refers to the conversion of local currency into the functional currency; translation is the conversion of the functional currency into the reporting currency

B. and translation refer to the same process of translating the functional currency into the reporting currency

C. is used to describe historical exchange rates while translation is used for current rates

Explanation

Translation is between functional and reporting currency. Remeasurement occurs between local and functional currencies.

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