When Translating Foreign Subsidiary Income Statements Using the Current Rate

question 11

Multiple Choice

When translating foreign subsidiary income statements using the current rate method,why are some accounts translated at an average rate?

• A)This approach improves matching.
• B)This approach accentuates the conservatism principle.
• C)This approach smoothes out highly volatile exchange rate fluctuations.
• D)This approach approximates the effect of transactions which occur continuously during the period.

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Definitions:

Productivity

The efficiency of production measured by the output per unit of input.

Standard of Living

The measure of fiscal prosperity, convenience, material assets, and critical needs granted to a select socioeconomic layer or specific geographic territory.

Goods and Services

Physical items (goods) and intangible assistance or work (services) provided to satisfy the needs and wants of consumers.

Total Supply of Money

The total amount of monetary assets available in an economy at a specific time, including cash, bank deposits, and liquid assets.