When Using the Current Rate Method, the Translation Adjustment from Translating

question 5

Multiple Choice

When using the current rate method, the translation adjustment from translating a foreign subsidiary's financial statements should be shown as

• A) An asset or liability (depending on the balance) in the consolidated balance sheet.
• B) A revenue or expense (depending on the balance) in the consolidated income statement.
• C) A component of stockholders' equity in the consolidated balance sheet.
• D) A component of cash flows from financing activities in the consolidated statement of cash flows.
• E) An element of the notes which accompany the consolidated financial statements.

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Definitions:

Foreign Currency Reserve

Refers to the foreign currencies held by a central bank or a monetary authority, used to support its liabilities, stabilize its currency, and finance trade imbalances.

Income

The money received, especially on a regular basis, for work or through investments.

Opportunity Cost

The price paid for not choosing the next most favorable option when deciding or picking between different possibilities.

Term Deposit

A bank deposit with a fixed term and typically a fixed rate of interest, where withdrawal can only occur after the term ends without penalty.