Asked by Ramses Atahualpa on Jun 25, 2024
Verified
When accounting for a non-free-standing foreign subsidiary,translation exchange rates are accounted for using the temporal method which involves reporting all cost of goods sold accounts at the
A) current rate.
B) historical rate.
C) rate at time of transaction.
D) present value rate.
Temporal Method
An accounting technique used to convert the financial statements of a subsidiary into the parent company's currency by using the exchange rates in effect at the time the assets and liabilities were acquired.
Translation Exchange Rates
Rates used to convert the financial statements of a foreign subsidiary to the reporting currency of the parent company.
Historical Rate
The exchange rate used to convert transactions in foreign currencies to a domestic currency, based on the rate at the time of the transaction.
- Understand the methods used for translating foreign subsidiary financial statements into the parent's reporting currency and the implications of the current rate and temporal method.
Verified Answer
Learning Objectives
- Understand the methods used for translating foreign subsidiary financial statements into the parent's reporting currency and the implications of the current rate and temporal method.
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