Under What Condition Should the Gain or Loss from Translating

question 29

Multiple Choice

Under what condition should the gain or loss from translating foreign currency profit of subsidiary into the parent's home currency be included in the subsidiary's measure of performance?

• A) If the subsidiary manager is authorized to hedge the translation exposure
• B) If there is a translation gain, but not if there is a translation loss
• C) If the multinational corporation is using the same method of translation for performance evaluation as it does for financial reporting
• D) If the impact on cash flows from foreign exchange is minimal

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Definitions:

Onerous Exemption Clause

A term in a contract that imposes heavy obligations on one party, which may be difficult to fulfill.

Aggrieved Purchaser

A buyer who has suffered because of a breach of contract or misrepresentation during a purchase.

Fundamental Breach

A severe violation of a contract that justifies the aggrieved party's right to terminate the agreement and seek damages.

Condition

An essential term of a contract.