Why Do Mexican Accounting Standards Require All Nonmonetary Assets and Liabilities

question 33

Multiple Choice

Why do Mexican accounting standards require all nonmonetary assets and liabilities to be restated in terms of purchasing power of the Mexican currency?

• A)To properly reflect exchange rate gains and losses in the financial statement
• B)In order to reflect the historical cost of the assets and financing associated with these assets
• C)To reflect the high rates of inflation that Mexico has experienced
• D)Because historical costs overstate the value of the assets and corresponding claims on resources

---

Definitions:

Inventory

Items, such as raw materials, work-in-progress, and finished goods, that a company holds with the intention of selling them.

Operating Activities

Day-to-day business functions and transactions that affect a company's net income, primarily revenue and expense activities.

Net Income

The amount of money that remains after subtracting all expenses, taxes, and costs from total revenue.

Cash Dividends

Payments made by a corporation to its shareholder members. It is the share of profits distributed.