Question #116
Reading: Reading 10 Multinational Operations
PDF File: Reading 10 Multinational Operations.pdf
Page: 64
Status: Unattempted
Correct Answer: A
Question
The local currency is:
Answer Choices:
A. translated into the functional currency under the current rate method
B. the preferred functional currency for subsidiaries that are highly integrated with the parent
C. the same as the functional currency under the current rate method
Explanation
The local currency is best described as the currency of the country in which the foreign
subsidiary is located. If a subsidiary is highly integrated with its parent or operating in a
high-inflation environment, the functional currency is the parent's currency. Local
currencies are remeasured under the temporal method.