Homeko, Inc

question 21

Multiple Choice

Homeko, Inc. is located in the U.S., but it has subsidiaries in Germany. When the euro appreciates relative to the U.S. dollar, what is the direction of the translation adjustment to consolidate Homeko's financial statements?

• A) When there is net asset exposure, the translation adjustment will be positive.
• B) When there is net liability exposure, the translation adjustment will be positive.
• C) The direction of the adjustment is indeterminate.
• D) There will be no adjustment necessary unless the difference is realized.

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Definitions:

Third-Party Beneficiary

An individual or entity that benefits from the terms of a contract, despite not being one of the principal parties involved in the agreement.

Incidental Beneficiary

A third party who unintentionally benefits from a contract made between two other parties, without having any enforceable rights under that contract.

Novation

A legal process where an old debt, obligation, or contract is replaced by a new one, effectively extinguishing the original agreement and substituting it with a new party or terms.

Obligor

An Obligor is the party in a contractual agreement who is bound to provide a specified performance to another party, the obligee.