Which of the following statements is correct?

A) If the functional currency of the foreign operation is different than the parent's functional currency, depreciation and amortization must be translated using closing rates.
B) If the functional currency of the foreign operation is different than the parent's functional currency, depreciation and amortization are translated using average rates.
C) If the functional currency of the foreign operation is different than the parent's functional currency, depreciation and amortization must be translated using historical rates.
D) If the functional currency of the foreign operation is the same as the parent's functional currency, depreciation and amortization must be translated using closing rates.

Question

Abigail Brackeen · Accepted Answer

Final Answer : B, Explanation :  Depreciation and amortization, being income statement items, are typically translated using the average exchange rate for the period when the functional currency of the foreign operation differs from the parent's functional currency. This approach provides a reasonable approximation of the effects of exchange rate changes over the period.

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