What Is the "Disappearing Plant" Problem That Is Addressed by FASB

question 12

Multiple Choice

What is the "disappearing plant" problem that is addressed by FASB ASC 830, Foreign Currency Matters?

• A) This refers to the accelerated depreciation methods that are popular for fixed asset valuation.
• B) High inflation can result in extreme decreases in the reported amounts for foreign fixed assets.
• C) Cheap foreign currency results in U.S. companies moving factory operations offshore.
• D) Investment in fixed assets was not being reported on foreign subsidiary financial statements.

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Definitions:

Accrued Liability

An expense that a business has incurred but has not yet paid, which is recognized in the financial statements for the period it relates to.

Loss

The result when a company's expenses exceed its revenues during a specific period, leading to a negative net income.

Operating Cycle

The average time period between the acquisition of materials for production and the receipt of cash from sales of the finished goods, critical for managing cash flow.

Current Liabilities

Financial obligations that a company is expected to pay within one year.