If a Subsidiary's Functional Currency Is Not the Local Currency

question 38

Multiple Choice

If a subsidiary's functional currency is not the local currency in which it operates, but the parent's reporting currency:

• A)​the foreign subsidiary's translated financial statements are identical to the statements that would have resulted if the transactions had been recorded in dollars.
• B)​the translation adjustment is recorded as a component of other comprehensive income.
• C)​there is no indication that exchange rate changes will impact the subsidiary's or the parent's cash flows or equity.
• D)​None of the above is correct.

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Definitions:

Nephron

The functional unit of the kidney, responsible for filtering blood and producing urine.

Microvilli

microscopic cellular membrane protrusions that increase the surface area for absorption, especially in the epithelial cells of the intestines.

Proximal Convoluted Tubule

The portion of the nephron in the kidney involved in the reabsorption of water, ions, and nutrients from the filtrate.

Active Transport

The movement of substances across a cell membrane against their concentration gradient, requiring energy in the form of ATP.