When It Is Not Clear What the Functional Currency Is

question 52

Multiple Choice

When it is not clear what the functional currency is, an accountant must use professional judgment to choose the functional currency. What is the main criterion upon which the choice should be based?

• A)Whether it faithfully represents the economic effects of the transactions and events.
• B)Whether it faithfully represents the translation effects of the transactions and events.
• C)Degree to which it minimizes accounting exposure.
• D)Whether it faithfully represents the accounting effects of the transactions and events.

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Definitions:

Bankruptcy Proceedings

The legal process through which individuals or businesses that are unable to repay their debts can seek relief from some or all of their financial obligations.

Proof of Claim

A written statement filed by a creditor in bankruptcy proceedings detailing the claim against the debtor.

Bankruptcy Court

A specialized federal court that deals with matters pertaining to bankruptcy and insolvency laws.

Debtor's Property

Assets owned by someone who owes money to creditors, which may be subject to claims or liens to satisfy debts.