Which of the following is true regarding the Current Rate method? A.It is used b

Question

Which of the following is true regarding the Current Rate method?

A.It is used by a multinational corporation whose affiliate is operating in a hyperinflationary country.

B.The current rate is the exchange rate in effect on the balance sheet publication date

C.Inventory and net plant and equipment are considered monetary assets

D.Translation gains or losses are added to the current period's income statement

A.It is used by a multinational corporation whose affiliate is operating in a hyperinflationary country.

Explanation / Answer

Current rate is a foreign currency translation method used for items in financial statement, specifically Balance sheet items. Income Statement items are not translated at current rate but at actual exchange rate. Therefore answer is B

In a hyperinflationary country, Temporal rate translation method is used

Inventory, net plant and equipment are non monetary assets.

Translation gain or losses are not added to current period's income statement but shown seperately on a reserve account

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