The General Rule for Translating Liabilities Denominated in a Foreign

question 18

Multiple Choice

The general rule for translating liabilities denominated in a foreign currency into the functional currency is to:

• A) translate all liabilities using the current rate existing at the end of the reporting period.
• B) first classify the liabilities into current or non-current.
• C) first classify the liabilities as monetary or non-monetary.
• D) translate all liabilities using the rate applicable when the original transaction was recorded.

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Definitions:

Loan Repayment

The process of paying back borrowed money to the lender, typically in regular installments over a set period.

Interest Rate

The percent of principal charged by the lender for the use of its money, or the amount earned on deposited funds.

Loan Liability

A financial obligation representing money borrowed that must be repaid, with interest, to the lender.

Exchange Rates

The speed at which one country's currency can be traded for another's, impacting global trade and investment activities.