Under US GAAP, What Is the Proper Treatment of Unrealized Foreign

question 16

Multiple Choice

Under U.S. GAAP, what is the proper treatment of unrealized foreign exchange gains?

• A) They should be deferred on the Balance Sheet until cash is received.
• B) The principle of conservatism requires that they should never be recognized.
• C) They should not be recorded until cash is received and the exchange transaction is completed.
• D) They should be recognized in income on the date the exchange rate changes.

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Definitions:

Blue-money Income

Informal term possibly referring to income earned in a foreign or stronger currency, or income derived from questionable or illegal activities.

Competitive Market

A market structure characterized by many buyers and sellers, free entry and exit, and a product for which each unit is identical to every other unit.

Coconuts

Tropical fruits or nuts known for their water, milk, oil, and meat, and often used as examples in economic models.

Fish

Aquatic vertebrates that are typically covered with scales and equipped with fins for swimming.