The Underlying Principle of the Current/noncurrent Method Is That Assets

question 33

Multiple Choice

The underlying principle of the current/noncurrent method is that assets and liabilities should be translated based on their maturity.

• A)Current assets and liabilities are converted at the current exchange rate in effect when the cash flow associated with the asset or liability actually occurred.Noncurrent assets and liabilities are translated at the historical exchange rate that prevailed when the asset was recognized.
• B)Current assets and liabilities,which by definition have a maturity of one year or less,are converted at the current exchange rate.Noncurrent assets and liabilities are translated at the historical exchange rate.
• C)All assets and liabilities are converted at the current exchange rate.
• D)none of the options

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Definitions:

Stock Dividend

Payment made by a firm to its owners in the form of stock, diluting the value of each share outstanding.

Cash Discounts

An incentive offered by sellers to buyers for early payment of invoices, aimed at encouraging prompt payment and improving cash flow.

Short-term Financial Policy

Pertains to strategies and decisions related to managing a company’s current assets and liabilities to ensure liquidity.

Flexible Short-term Policy

A financial strategy that allows for maintaining a higher level of current assets, providing a buffer against unforeseen liabilities or expenses.