When Something Is Indexed

question 58

Multiple Choice

When something is indexed:

• A) its value is automatically adjusted in proportion to the cost of living.
• B) it is expressed as a nominal value multiplied by a price index.
• C) its real value is converted into nominal terms for comparison.
• D) the value of consumption items is compared against the value of input prices.

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Definitions:

Temporal Method

An exchange rate conversion method used in financial reporting where monetary assets and liabilities are converted at current rates and non-monetary items at historical rates.

Canadian Dollars

Canadian dollars (CAD) refer to the official currency of Canada, which is used for all transactions within the country.

Translation Gain/Loss

The gain or loss resulting from the conversion of foreign currency amounts into the functional currency of a business during the consolidation of financial statements.

Functional Currency

The currency of the primary economic environment in which a company operates, typically used in reporting its financial statements.