When the Functional Currency Is Not the Same as the Presentation

question 50

Multiple Choice

When the functional currency is not the same as the presentation currency, the investee must translate the financial statements using the____________ for balance sheet accounts and ________________ for income statement accounts.

• A)year-end closing rate; year-end closing rate
• B)year-end closing rate; the rate when the transaction occurred
• C)the rate when the transaction occurred; year-end closing rate
• D)the rate when the transaction occurred; the rate when the transaction occurred.

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Definitions:

Recognition

The formal acknowledgment in accounting that a transaction or event affects the financial statements of a company.

Separate Incorporation

The legal process of forming a new corporation that is distinct and separate from any owners or other entities.

Subsidiary Dissolved

The process of legally dissolving a subsidiary company, which involves winding up its operations and financial affairs.

Acquisition

The process of obtaining control of another company or business asset through purchase, merger, or another method.