Pheng Company has two foreign subsidiaries. One is located in France, the other

Question

Pheng Company has two foreign subsidiaries. One is located in France, the other in Germany. Pheng has determined the British pound is the functional currency for the French subsidiary, while the U.S. dollar is the functional currency for the German subsidiary. Both subsidiaries maintain their books and records in their local currency (Euro). What method(s) will Pheng use to convert its French subsidiary's and its German subsidiary's financial statements into U.S. dollars?

                   French subsidiary                          German subsidiary

            a.    remeasure and translate                 translate                      

            b.    remeasure                                      remeasure and translate

            c.    remeasure and translate                 remeasure

            d.    translate                                         remeasure

Explanation / Answer

Answer to the question is c.

For french subsidiary its remeasure and translate. Following is the brief discription:

Remeasure is also called temporal method. Required only when functional currency is different from currency used to maintain books. Monetary assets and liabilities are translated using the current rate. This method converts foreign currency to functional currency. If the functional currency is something other than the U.S. dollar, the current rate method must be applied to restate the financial information into U.S. $.

For German subsidiary its remeasure. Following is the brief discription:

Its also called temporal method. Required only when functional currency is different from currency used to maintain books. Monetary assets and liabilities are translated using the current rate.

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