When Would the Balance Sheet Exposure Arising from the Current

question 43

Multiple Choice

When would the balance sheet exposure arising from the current rate method become realized?

• A)It is realized once the financial statements of the subsidiary and the parent are consolidated.
• B)It is realized any time the historical exchange rate is different from the spot rate at the balance sheet date.
• C)It is realized when the subsidiary is sold at book value and the proceeds are converted to parent company currency.
• D)It can never be realized because it is only the result of the choice of accounting methods and does not reflect real exposure.

---

Definitions:

Production Area

Part of a business where goods are manufactured or assembled.

Controllable Variance

The difference between the actual amount of variable factory overhead cost incurred and the amount of variable factory overhead budgeted for the standard product.

Factory Overhead

The indirect costs associated with manufacturing, such as utilities, maintenance, and salaries for management.

Budgeted Amount

Financial projections or planned amounts set aside for specific purposes, revenues, or expenses during a budget period.