Why must the two-transaction approach be used for recording foreign currency transactions under U.S.GAAP?
A)The two-transaction approach is required under IFRS.
B)U)S.GAAP requires conservatism in financial reporting.
C)All other methods are excessively complicated to use and therefore obscure the essence of the transaction.
D)Management made two decisions: one to sell and another to extend credit in a foreign currency.

Question

Quizplus · Accepted Answer

The two-transaction approach is used because management makes two separate decisions: one to sell goods or services and another to extend credit in a foreign currency, which involves recognizing the transaction and then accounting for any foreign exchange gains or losses separately.

Why Must the Two-Transaction Approach Be Used for Recording Foreign