The Two Methods for the Translation of Foreign Subsidiary Financial

question 9

Essay

The two methods for the translation of foreign subsidiary financial statements are the current rate and temporal methods. Briefly, describe how each of these methods translates the foreign subsidiary financial statements into the parent company's consolidated statements. Identify when each technique should be used and the major advantage(s) of each.

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Definitions:

Freewriting

A writing technique where a person writes continuously for a set period without worrying about spelling or grammar, to generate ideas.

Generate Ideas

The process of creating new concepts, solutions, or approaches to solve problems or address challenges.

Economic Change

Adjustments in the economic conditions or structures, which can affect employment, inflation rates, and overall economic growth.

Common Currency

A currency that is used by multiple countries, enabling easier trade and economic policy coordination, such as the Euro in the European Union.