A gain resulting from translating foreign currency financial statements (local c
ID: 2432820 • Letter: A
Question
A gain resulting from translating foreign currency financial statements (local currency is functional currency) into U.S. dollars should be reported as:
a stockholders' equity adjustment from translation
a deferred item in the balance sheet
an extraordinary item in the income statement for the period in which the rates change
an ordinary item in the income statement
a.a stockholders' equity adjustment from translation
b.a deferred item in the balance sheet
c.an extraordinary item in the income statement for the period in which the rates change
d.an ordinary item in the income statement
Explanation / Answer
A gain resulting from translating foreign currency financial statements into US dollars should be reported as " a stockholders equity adjustment from translation".
Explanation -
Foreign currency translation gains or losses are disclosed in "other comprehensive income ". Other comprehensive income is a ledger account which includes those incomes, gains, expenses and losses that are not yet realised. These are not included in normal income statement. Other comprehensive income is disclosed in the stockholders equity section of the balance sheet.
Therefore, the correct answer is statement (A).
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