Question #90
Reading: Reading 10 Multinational Operations
PDF File: Reading 10 Multinational Operations.pdf
Page: 50
Status: Unattempted
Correct Answer: A
Question
Dave Iverson, CFA, is analyzing the recently released financial statement of Global Corp., a large multinational manufacturing company with production facilities across Europe and Southeast Asia. The company's choice of functional currency is not disclosed, but Iverson does notice that Global Corp. does not have any cumulative translation adjustments (CT
Answer Choices:
A. The temporal method of foreign currency translation is used exclusively
B. The temporal method of foreign currency translation is used for at least some of its subsidiaries
C. The current rate method of foreign currency translation is used exclusively
Explanation
The choice of functional currency is the determining factor as to which method of foreign
currency translation is utilized. If no CTA appears on the balance sheet, then the parent
currency must be the functional currency for all of the company's subsidiaries and only
the temporal method is used.