Chapter 14 AAC

The GAAP permits two methods for converting the foreign subsidiary's financial statements into U.S. dollars: temporal method and the fixed rate method. True False

False

The reporting currency is the currency in which the consolidated financial statements and the subsidiary financial statements are prepared. True False

False

Under the temporal method monetary assets and liabilities are remeasured at historical rates and other assets and equities are remeasured at current exchange rates. True False

False

A foreign subsidiary's foreign currency statements must conform with the U.S. GAAP before translated into U.S. dollars. True False

True

For foreign subsidiaries whose functional currency is not the parent's reporting currency the current rate method is used to translate assets and liabilities using the exchange rate on the balance sheet date. True False

True

Functional currency is the currency of the primary economic environment in which it operates. True False

True

Gains and losses from foreign currency transactions which are designated as economic hedges of a net investment in a foreign subsidiary are recorded as translation adjustments of stockholder's equity. True False

True

Intercompany transactions that produce receivable balances denominated in a currency other than the entity's functional currency are intercompany transactions. True False

True

The gain or loss on an after-tax basis from the hedging operations that can be considered a translation adjustment is limited in amount to the current translation adjustment from the equity investment. True False

True

When all elements of the financial statements are translated using a current exchange rate, it is referred to as the current rate method. True False

True

When the functional currency of a foreign entity is the U.S. dollar, the foreign entity's accounts are remeasured into its U.S. dollar functional currency. True False

True