Asked by Priscila Troche on May 07, 2024
Verified
When translating into the functional currency, monetary liabilities are translated using the:
A) exchange rate prevailing at the end of the last reporting period.
B) exchange rate current at the date the item was first recorded.
C) exchange rate current at end of reporting period.
D) closing exchange rate.
Functional Currency
The currency of the primary economic environment in which an entity operates, usually the currency of the country where it primarily generates and expends cash.
Monetary Liabilities
Obligations of an entity to pay cash to another party in the future as a result of past transactions or events.
Exchange Rate
The ratio of exchange between two currencies.
- Recognize the specific exchange rates used for translating different types of transactions and balances (such as assets, liabilities, equity, revenue, and expenses).
Verified Answer
SS
Shivam SauravMay 07, 2024
Final Answer :
C
Explanation :
According to the current accounting standards, monetary liabilities are translated using the exchange rate current at the end of the reporting period. This is consistent with the principle of using current or market values for financial reporting. Using the closing exchange rate or the rate at the date of recording may not accurately reflect the current value of the liability.
Learning Objectives
- Recognize the specific exchange rates used for translating different types of transactions and balances (such as assets, liabilities, equity, revenue, and expenses).