In the Process of Consolidating the Translated Financial Accounts of a Foreign

question 45

Multiple Choice

In the process of consolidating the translated financial accounts of a foreign operation,the elimination entry to record goodwill will be affected by the translation process in what way?

• A) The elimination of the investment against the pre-acquisition capital and reserves and the calculation of goodwill will vary each year depending on the exchange rates at the end of the period that are used to calculate the foreign exchange gain or loss.
• B) The elimination of the investment against the pre-acquisition capital and reserves and the calculation of goodwill will be the same unless inter-company transactions have to be eliminated, in which case the entry will have to be adjusted for the exchange rate differences on the inter-company transactions.
• C) The elimination of the investment against the pre-acquisition capital and reserves and the calculation of goodwill will be the same each year the elimination entry is made.
• D) The elimination of the investment against the pre-acquisition capital and reserves and the calculation of goodwill will be affected by any subsequent transfers between equity items that may arise as a result of bonus issues or transfers between reserves.

---

Definitions:

Negatively Affects

Leads to adverse consequences or reduces the quality or performance of something.

Air Traffic

The movement of aircraft within the air space controlled by various authorities, including commercial, private, and military flights.

Perfectly Competitive

A market structure characterized by many sellers offering identical products, leading to price determination through supply and demand forces without individual control.

Externalities

Economic side effects or consequences that affect an uninvolved third party; can be either positive or negative.