Question 1

Under the current rate method of translating foreign currency financial statements, what is the amount of the balance sheet exposure?

Accepted Answer

A) It is equal to the amount of assets recorded by the subsidiary. 
B) It is equal to the amount of liabilities recorded by the subsidiary. 
C) It is equal to the foreign operation's net asset position. 
D) It is equal to total assets plus total liabilities. 
A) It is equal to the amount of assets recorded by the subsidiary. 
B) It is equal to the amount of liabilities recorded by the subsidiary. 
C) It is equal to the foreign operation's net asset position. 
D) It is equal to total assets plus total liabilities.

Question 2

Under FASB ASC 830, Foreign Currency Matters, when the current rate method is used, how are translation adjustments treated in the consolidated financial statements?

Accepted Answer

A) As gains or losses on the current period consolidated income statement 
B) As prior period adjustments to retained earnings of the parent 
C) As part of other comprehensive income on the consolidated balance sheet 
D) None of the above because the temporal method is not allowed under FASB ASC 830. 
A) As gains or losses on the current period consolidated income statement 
B) As prior period adjustments to retained earnings of the parent 
C) As part of other comprehensive income on the consolidated balance sheet 
D) None of the above because the temporal method is not allowed under FASB ASC 830.

Question 3

What is meant by the "translation" of foreign currency financial statements?

Accepted Answer

A) Converting financial statements prepared under foreign GAAP into domestic GAAP 
B) Converting financial statements of a foreign currency into a domestic currency 
C) Converting the language used in financial statements from foreign to domestic 
D) Converting historic cost financial statements into current cost financial statements 
A) Converting financial statements prepared under foreign GAAP into domestic GAAP 
B) Converting financial statements of a foreign currency into a domestic currency 
C) Converting the language used in financial statements from foreign to domestic 
D) Converting historic cost financial statements into current cost financial statements

Question 4

Which method of translating foreign currency financial statements must be used according to FASB ASC 830, Foreign Currency Matters?

Accepted Answer

A) Temporal method for all subsidiaries 
B) Current rate method for all subsidiaries 
C) U.S.parent companies may choose between the temporal method and the current rate method 
D) Temporal method for subsidiaries that are closely controlled by the parent and current rate method for subsidiaries which are not 
A) Temporal method for all subsidiaries 
B) Current rate method for all subsidiaries 
C) U.S.parent companies may choose between the temporal method and the current rate method 
D) Temporal method for subsidiaries that are closely controlled by the parent and current rate method for subsidiaries which are not

Question 5

What is the paradox of hedging balance sheet exposure?

Accepted Answer

A) Real costs can be incurred to hedge an unrealized translation adjustment. 
B) The hedging process rarely works the way management intended. 
C) Hedging is a conceptual process that is nearly impossible to undertake in the real world. 
D) Markets have yet to be developed that offer the kinds of derivative instruments required for hedging. 
A) Real costs can be incurred to hedge an unrealized translation adjustment. 
B) The hedging process rarely works the way management intended. 
C) Hedging is a conceptual process that is nearly impossible to undertake in the real world. 
D) Markets have yet to be developed that offer the kinds of derivative instruments required for hedging.

Question 6

Under FASB ASC 830, Foreign Currency Matters, what group is responsible for determining the functional currency of a foreign subsidiary for many cases?

Accepted Answer

A) Financial Accounting Standards Board 
B) International Accounting Standards Board 
C) Securities and Exchange Commission 
D) Parent company management 
A) Financial Accounting Standards Board 
B) International Accounting Standards Board 
C) Securities and Exchange Commission 
D) Parent company management

Question 7

What exchange rate should be used to translate the common stock of Essco Ltd, a foreign subsidiary of Peako Corp., when consolidating the financial statements using the current rate method?

Accepted Answer

A) Current rate 
B) Historical rate 
C) Average rate 
D) Cannot be determined with the information given 
A) Current rate 
B) Historical rate 
C) Average rate 
D) Cannot be determined with the information given

Question 8

Under FASB ASC 830, Foreign Currency Matters, what is the definition of "functional currency?"

Accepted Answer

A) The primary currency used by the parent company 
B) The currency that minimizes the translation adjustment on the consolidated financial statements 
C) The currency in which the subsidiary does its financial reporting 
D) The primary currency of the foreign entity's operating environment 
A) The primary currency used by the parent company 
B) The currency that minimizes the translation adjustment on the consolidated financial statements 
C) The currency in which the subsidiary does its financial reporting 
D) The primary currency of the foreign entity's operating environment

Question 9

A Danish subsidiary of a U.S.corporation recorded a building it purchased in 2010 for 100,000,000 krone, when the exchange rate was $0.132/krone.The current exchange rate is $0.163/krone.Under the temporal method, how should the translated amount of the restated asset be interpreted?

Accepted Answer

A) The U.S.parent would have to pay $16,300,000 to acquire the building today. 
B) The U.S.parent would have had to pay $13,200,000 to acquire the building in 2010. 
C) The building is worth $13,200,000 to the U.S.parent today. 
D) None of the above 
A) The U.S.parent would have to pay $16,300,000 to acquire the building today. 
B) The U.S.parent would have had to pay $13,200,000 to acquire the building in 2010. 
C) The building is worth $13,200,000 to the U.S.parent today. 
D) None of the above

Question 10

Under IAS 21, which of the following is NOT a factor in determining functional currency?

Accepted Answer

A) It is the currency that influences sales prices for goods and services. 
B) It is the currency that mainly influences labor, material and other costs of providing goods and services. 
C) It is the currency least likely to experience hyperinflation. 
D) It is the currency in which funds from financing activities are generated. 
A) It is the currency that influences sales prices for goods and services. 
B) It is the currency that mainly influences labor, material and other costs of providing goods and services. 
C) It is the currency least likely to experience hyperinflation. 
D) It is the currency in which funds from financing activities are generated.

Question 11

Under the temporal method of translating foreign currency financial statements, what exchange rate should be used for cost of goods sold?

Accepted Answer

A) Spot rate at the end of the year 
B) Average rate during the year 
C) Spot rate mid-year 
D) There is no single rate that can be used for this purpose 
A) Spot rate at the end of the year 
B) Average rate during the year 
C) Spot rate mid-year 
D) There is no single rate that can be used for this purpose

Question 12

Which of the following methods for translating foreign currency financial statements require to be used under IAS 21?

Accepted Answer

A) Current/Noncurrent method 
B) Monetary/Nonmonetary method 
C) Temporal method 
D) All of the above may be used under IAS 21. 
A) Current/Noncurrent method 
B) Monetary/Nonmonetary method 
C) Temporal method 
D) All of the above may be used under IAS 21.

Question 13

In their research published in 1988 related to translating foreign currency financial statements, Doupnik and Evans found that U.S.multinationals were biased in favor of using a foreign currency as the functional currency.What reason did the researchers give for this management decision?

Accepted Answer

A) It was easier than proving to the FASB that a subsidiary's functional currency was the U.S.dollar. 
B) Doing so allowed companies greater latitude in selecting the method of translating foreign currency financial statements. 
C) This allows the use of the current method, which defers recognizing translation gains or losses in income. 
D) This allows the use of the temporal method, which defers recognizing transaction adjustments in income. 
A) It was easier than proving to the FASB that a subsidiary's functional currency was the U.S.dollar. 
B) Doing so allowed companies greater latitude in selecting the method of translating foreign currency financial statements. 
C) This allows the use of the current method, which defers recognizing translation gains or losses in income. 
D) This allows the use of the temporal method, which defers recognizing transaction adjustments in income.

Question 14

According to FASB ASC 830, Foreign Currency Matters, which of the following conditions would indicate that a foreign subsidiary's functional currency is the parent company's currency?

Accepted Answer

A) Active local sales market 
B) Sales price not affected by changes in exchange rate in the short-run 
C) High volume of intercompany transactions 
D) All of the above are indicators that the functional currency is the parent company's currency. 
A) Active local sales market 
B) Sales price not affected by changes in exchange rate in the short-run 
C) High volume of intercompany transactions 
D) All of the above are indicators that the functional currency is the parent company's currency.

Question 15

Which of the following is NOT among the four methods which have been used to translate foreign currency financial statements globally?

Accepted Answer

A) The historic/non-historic method 
B) The monetary/nonmonetary method 
C) The temporal method 
D) The current/noncurrent method 
A) The historic/non-historic method 
B) The monetary/nonmonetary method 
C) The temporal method 
D) The current/noncurrent method

Question 16

When the current rate method is used, the sign (+ or -) of the translation adjustment is the result of:

Accepted Answer

A) appreciation or depreciation of the foreign currency. 
B) the nature of the balance sheet exposure. 
C) both (
A)  and (
B) . 
D) None of the above 
A) appreciation or depreciation of the foreign currency. 
B) the nature of the balance sheet exposure. 
C) both (
A)  and (
B) . 
D) None of the above

Question 17

Parentco, Inc.had a negative cumulative translation adjustment of ($250,000) on its balance sheet pertaining to its investment in Subko Ltd at the point in time that Parentco sold its interest in Subko.How must Parentco handle this translation adjustment when it records the sale of Subko?

Accepted Answer

A) As an increase in income (gain on disposal) 
B) As a decrease in income (loss on disposal) 
C) The cumulative translation adjustment will not be affected by the sale. 
D) It will be a prior period adjustment to retained earnings. 
A) As an increase in income (gain on disposal) 
B) As a decrease in income (loss on disposal) 
C) The cumulative translation adjustment will not be affected by the sale. 
D) It will be a prior period adjustment to retained earnings.

Under the current rate method of translating foreign currency financial statements, what is the amount of the balance sheet exposure?

Under FASB ASC 830, Foreign Currency Matters, when the current rate method is used, how are translation adjustments treated in the consolidated financial statements?

What is meant by the "translation" of foreign currency financial statements?

Which method of translating foreign currency financial statements must be used according to FASB ASC 830, Foreign Currency Matters?

What is the paradox of hedging balance sheet exposure?

Under FASB ASC 830, Foreign Currency Matters, what group is responsible for determining the functional currency of a foreign subsidiary for many cases?

What exchange rate should be used to translate the common stock of Essco Ltd, a foreign subsidiary of Peako Corp., when consolidating the financial statements using the current rate method?

Under FASB ASC 830, Foreign Currency Matters, what is the definition of "functional currency?"

A Danish subsidiary of a U.S.corporation recorded a building it purchased in 2010 for 100,000,000 krone, when the exchange rate was $0.132/krone.The current exchange rate is $0.163/krone.Under the temporal method, how should the translated amount of the restated asset be interpreted?

Under IAS 21, which of the following is NOT a factor in determining functional currency?

Under the temporal method of translating foreign currency financial statements, what exchange rate should be used for cost of goods sold?

Which of the following methods for translating foreign currency financial statements require to be used under IAS 21?

In their research published in 1988 related to translating foreign currency financial statements, Doupnik and Evans found that U.S.multinationals were biased in favor of using a foreign currency as the functional currency.What reason did the researchers give for this management decision?

According to FASB ASC 830, Foreign Currency Matters, which of the following conditions would indicate that a foreign subsidiary's functional currency is the parent company's currency?

Which of the following is NOT among the four methods which have been used to translate foreign currency financial statements globally?

When the current rate method is used, the sign (+ or -) of the translation adjustment is the result of:

Parentco, Inc.had a negative cumulative translation adjustment of ($250,000) on its balance sheet pertaining to its investment in Subko Ltd at the point in time that Parentco sold its interest in Subko.How must Parentco handle this translation adjustment when it records the sale of Subko?

Introduction to International Accounting

Worldwide Accounting Diversity

International Convergence of Financial Reporting

International Financial Reporting Standards: Part I

International Financial Reporting Standards: Part II

Comparative Accounting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Additional Financial Reporting Issues

Analysis of Foreign Financial Statements

International Taxation

International Transfer Pricing

Strategic Accounting Issues in Multinational Corporations

Comparative International Auditing and Corporate Governance

International Corporate Social Reporting

Filters

Exam 8: Translation of Foreign Currency Financial Statements

Under the current rate method of translating foreign currency financial statements, what is the amount of the balance sheet exposure?

Under FASB ASC 830, Foreign Currency Matters, when the current rate method is used, how are translation adjustments treated in the consolidated financial statements?

What is meant by the "translation" of foreign currency financial statements?

Which method of translating foreign currency financial statements must be used according to FASB ASC 830, Foreign Currency Matters?

What is the paradox of hedging balance sheet exposure?

Under FASB ASC 830, Foreign Currency Matters, what group is responsible for determining the functional currency of a foreign subsidiary for many cases?

What exchange rate should be used to translate the common stock of Essco Ltd, a foreign subsidiary of Peako Corp., when consolidating the financial statements using the current rate method?

Under FASB ASC 830, Foreign Currency Matters, what is the definition of "functional currency?"

A Danish subsidiary of a U.S.corporation recorded a building it purchased in 2010 for 100,000,000 krone, when the exchange rate was $0.132/krone.The current exchange rate is $0.163/krone.Under the temporal method, how should the translated amount of the restated asset be interpreted?

Under IAS 21, which of the following is NOT a factor in determining functional currency?

Under the temporal method of translating foreign currency financial statements, what exchange rate should be used for cost of goods sold?

Which of the following methods for translating foreign currency financial statements require to be used under IAS 21?

In their research published in 1988 related to translating foreign currency financial statements, Doupnik and Evans found that U.S.multinationals were biased in favor of using a foreign currency as the functional currency.What reason did the researchers give for this management decision?

According to FASB ASC 830, Foreign Currency Matters, which of the following conditions would indicate that a foreign subsidiary's functional currency is the parent company's currency?

Which of the following is NOT among the four methods which have been used to translate foreign currency financial statements globally?

When the current rate method is used, the sign (+ or -) of the translation adjustment is the result of:

Parentco, Inc.had a negative cumulative translation adjustment of ($250,000) on its balance sheet pertaining to its investment in Subko Ltd at the point in time that Parentco sold its interest in Subko.How must Parentco handle this translation adjustment when it records the sale of Subko?

Introduction to International Accounting

Worldwide Accounting Diversity

International Convergence of Financial Reporting

International Financial Reporting Standards: Part I

International Financial Reporting Standards: Part II

Comparative Accounting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Additional Financial Reporting Issues

Analysis of Foreign Financial Statements

International Taxation

International Transfer Pricing

Strategic Accounting Issues in Multinational Corporations

Comparative International Auditing and Corporate Governance

International Corporate Social Reporting

Filters