Under US GAAP, What Method of Translating Foreign Currency Financial Statements

question 24

Multiple Choice

Under U.S. GAAP, what method of translating foreign currency financial statements must be used for subsidiaries in highly inflationary economies?

• A) Current rate method
• B) Current/non-current method
• C) Temporal method
• D) Monetary/non-monetary method

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Definitions:

Break-Even Analysis

A financial calculation that determines the point at which total revenues equal total costs, indicating no profit or loss.

Variable Expenses

Costs that change in proportion to the level of activity or volume of output produced.

Unit Fixed Expenses

These are expenses that do not change with the level of production or sales within a certain range and are calculated per unit of product.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - as part of the cost of a finished unit of product.