Which of the following statements regarding the effects of translation on financ

Question

Which of the following statements regarding the effects of translation on financial statement items/ratios is most accurate?

A)Leverage is higher under the current rate method as compared to under the local currency.

B)Depreciation in the reporting currency under the current rate method is higher than under the temporal method if the local currency has appreciated.

C)Fixed assets are relatively overstated under the temporal method compared to the local currency if the local currency has appreciated.

A)Leverage is higher under the current rate method as compared to under the local currency.

B)Depreciation in the reporting currency under the current rate method is higher than under the temporal method if the local currency has appreciated.

C)Fixed assets are relatively overstated under the temporal method compared to the local currency if the local currency has appreciated.

Explanation / Answer

Answer :- Option B). Depreciation in the reporting currency under the current rate method is higher than under the temporal method if the local currency has appreciated.

Explanation :- The statement mentioned in option (B) is very accurate regarding the impacts of translation on the financial statement ratios. The statements mentioned in options A and C are not accurate as to the impacts of translation on the financial statement ratios / items.

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