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The two methods for the translation of foreign subsidiary financial statements are the current rate and temporal methods. Briefly, describe how each of these methods translates the foreign subsidiary financial statements into the parent company's consolidated statements. Identify when each technique should be used and the major advantage(s) of each.
Simple Interest Rate
A fixed percentage of the principal amount that is paid or earned over a specific period of time, not compounding.
GIC
An investment known as a Guaranteed Investment Certificate, which offers a risk-free fixed rate of return over a predetermined period.
Maturity Value
The total amount due or payable at the end of a loan or investment period, including the principal and any accrued interest.
Daily Interest
Interest calculation method where interest is calculated daily on the principal amount, either leading to faster growth in savings accounts or quicker payoff in loans.
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