Under US GAAP, What Is the Proper Treatment of Unrealized Foreign

question 16

Multiple Choice

Under U.S. GAAP, what is the proper treatment of unrealized foreign exchange gains?

• A) They should be deferred on the Balance Sheet until cash is received.
• B) The principle of conservatism requires that they should never be recognized.
• C) They should not be recorded until cash is received and the exchange transaction is completed.
• D) They should be recognized in income on the date the exchange rate changes.

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Definitions:

Sample Standard Deviation

A measure that quantifies the amount of variation or dispersion of a set of sample data values.

Variance

A measure of the spread or dispersion of a set of values, indicating how much the values differ from the mean of the set.

Risk

Exposure to uncertainty or potential financial loss; the chance that an investment's actual gains will differ from expected gains.

Consistency

A property of an estimator in statistics that indicates the ability to produce estimates closer to the true parameter value as the sample size increases.