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Foreign Currency Financial Statements
True or False
1
.
Before the financial statements of a foreign subsidiary can be translated
into dollars for consolidation purposes, the financials must be in conformity
with US GAAP.
True
False
2
.
Both the current rate method and the temporal rate method translate cost
of goods sold using the current rate for the year.
True
False
3
.
Cumulative translation adjustment is an equity account that reflects the
economic effects of exchange rate fluctuations between accounting
periods.
True
False
4
.
The basic premise of the current method is that the foreign subsidiary’s
accounts should be translated at the exchange rate that most closely
reflects their economic substance.
True
False
5
If the functional currency is the subsidiary’s local currency, the current rate
.
method will be used to translate the financial statements of the subsidiary
for consolidation purposes.
True
False
6
.
Functional currency refers to the currency of the country in which the
company is domiciled.
True
False
7
.
A “highly inflationary economy” is one in which the rate of inflation has
been in excess of 100% for each of three consecutive years.
True
False
8
.
The minority interest in a foreign subsidiary should be translated or
remeasured before the equity method is applied.
True
False