In General, If a Foreign Firm Translates Its Financial Statements

question 33

Multiple Choice

In general, if a foreign firm translates its financial statements according to the temporal method during a period when the value of the foreign currency is rising against the reporting currency, the firm will recognize a

• A) translation gain in the income statement.
• B) translation loss in the income statement.
• C) translation gain in the accumulated translation adjustment account in owners' equity.
• D) translation loss in the accumulated translation adjustment account in owners' equity.

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Definitions:

Consumer Price Index

An indicator quantifying the mean variation over periods in the financial commitments urban consumers make towards a particular set of consumer goods and services.

Basket of Goods

A fixed set of consumer products and services whose price is monitored over time to calculate inflation through the Consumer Price Index.

Inflation Rate

The rate at which prices for a wide range of goods and services go up, causing a decline in how much can be bought with the same amount of money.

Teddy Bears

Soft, plush toys in the form of bears, often given as a comfort object for children and as gifts of affection for holidays or special occasions.