Question #126
Reading: Reading 10 Multinational Operations
PDF File: Reading 10 Multinational Operations.pdf
Page: 67
Status: Unattempted
Correct Answer: A
Question
Which of the following statements regarding the functional currency is least accurate? The functional currency:
Answer Choices:
A. is remeasured into the reporting currency under the temporal method
B. is the currency of the primary economic environment in which the foreign subsidiary generates and expends cash
C. is determined by management
Explanation
The basis for using the current rate method is when Functional Currency is NOT the same
as Parent's Presentation (reporting) Currency. The basis for using the temporal method is
when Functional Currency = Parent's Presentation Currency.
The local currency is remeasured into the functional currency under the temporal method.
The functional currency is translated into the reporting currency using the current rate
method.