Question #64 - Reading 10 Multinational Operations

Reading: Reading 10 Multinational Operations

PDF File: Reading 10 Multinational Operations.pdf

Page: 37

Status: Unattempted

Correct Answer: B

Shared Context

- Giant Company should use the following method to reflect the results of Grande, Inc., in its financial statements: A) the temporal method followed by the current rate method. B) the current rate method. C) the temporal method.

Question

Which of the following statements regarding the current rate method is the most accurate?

Answer Choices:

A. This method is not typically used when the subsidiary is relatively independent of the parent

B. Translation gains and losses are reported in equity

C. Income statements items are translated at the current exchange rate.

Explanation

Under the current rate method, translation gains and losses are reported in equity in the CTA account. This method is typically used when the subsidiary is relatively independent of the parent. Revenues and expenses are translated at the average rate.

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