Many Financial Instruments Are Standardized Because

question 21

Multiple Choice

Many financial instruments are standardized because:

• A)It is believed that most parties to a contract do not read them anyway
• B)Complexity is costly, the more complex a contract, the more it costs to create
• C)The standardization of contracts makes them harder to understand
• D)It is required by the government

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Definitions:

Current-Rate Method

A method of foreign currency translation where all financial statement items are converted at the current exchange rate.

Translation Gain

A non-cash gain resulting from the conversion of foreign currency financial statements into the reporting currency of the parent company in consolidation.

Integrated Subsidiary

A subsidiary whose operations are closely intertwined with its parent company, often sharing management and functional processes.

Reporting Currency

The currency used in the financial statements of a company, typically the national currency of the country where the company is located.