Under What Condition Should the Gain or Loss from Translating

question 11

Multiple Choice

Under what condition should the gain or loss from translating foreign currency profit of subsidiary into the parent's home currency be included in the subsidiary's measure of performance?

• A)if the subsidiary manager is authorized to hedge the translation exposure
• B)if there is a translation gain,but not if there is a translation loss
• C)if the multinational corporation is using the same method of translation for performance evaluation as it does for financial reporting
• D)if the impact on cash flows from foreign exchange is minimal

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Definitions:

Hydrolysis

Water-requiring chemical reaction that breaks a molecule into smaller subunits.

Carbohydrate

Carbohydrates are a group of organic compounds including sugars, starch, and cellulose that serve as a major energy source in the diet of animals.

Energy Store

The capacity of a system to contain energy for later use, often in the form of chemical bonds, mechanical position, or heat.

Animals

Multicellular, eukaryotic organisms of the kingdom Animalia that consume organic material, breathe oxygen, can move, reproduce sexually, and grow from a hollow sphere of cells, the blastula, during early embryonic development.