The Underlying Principle of the Current Rate Method Is

question 22

Multiple Choice

The underlying principle of the current rate method is

• A)assets and liabilities should be translated based on their maturity.
• B)monetary accounts have a similarity because their value represents a sum of money whose currency equivalent after translation changes each time the exchange rate changes.
• C)monetary accounts are translated at the current exchange rate; other accounts are translated at the current exchange rate if they are carried on the books at current value; items carried at historical cost are translated at historic exchange rates.
• D)all balance sheet accounts are translated at the current exchange rate,except for stockholders' equity.A "plug" equity account,named cumulative translation adjustment (CTA),is used to make the balance sheet balance,since translation gains or losses do not go through the income statement according to this method.

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Machinery and Equipment

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