In Their Research Published in 1988 Related to Translating Foreign

question 42

Multiple Choice

In their research published in 1988 related to translating foreign currency financial statements, Doupnik and Evans found that U.S. multinationals were biased in favor of using a foreign currency as the functional currency. What reason did the researchers give for this management decision?

• A) It was easier than proving to the FASB that a subsidiary's functional currency was the U.S. dollar.
• B) Doing so allowed companies greater latitude in selecting the method of translating foreign currency financial statements.
• C) This allows the use of the current method, which defers recognizing translation gains or losses in income.
• D) This allows the use of the temporal method, which defers recognizing transaction adjustments in income.

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Definitions:

Cloth

A flexible material made by weaving, knitting, crocheting, or bonding fibers together, used for making garments, furnishings, or other products.

Cotton

A natural fiber and cash crop that is used to produce textiles, clothing, and other products.

Relevant Geographic Market

The area in which a company operates and competes for customers, defined by where its customers are located and where it faces competitive pressures.

Anticompetitive

Actions or practices that unfairly limit competition in a market, often regulated by antitrust laws.