When May the Translation Adjustment Resulting from Translating Financial Statements

question 41

Multiple Choice

When may the translation adjustment resulting from translating financial statements using the current or functional method be recognized in income?

• A)​When there is an accumulated other comprehensive deficit that exceeds retained earnings.
• B)​When the parent disposes of its interest in the subsidiary.
• C)​When the functional currency changes to the reporting currency.
• D)​None of the above is correct.

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Definitions:

Elements of Control

Factors or conditions that grant an entity the power to govern the financial and operating policies of another entity, typically to benefit from its activities.

Relevant Activities

Activities that significantly affect the returns of an investment or project under consideration.

Funding Structure

Refers to the composition of an organization’s capital, including the mix of its debt and equity financing.

Parent Entity

A company that holds a controlling interest in one or more subsidiaries, giving it control over their operations and policies.