Why is the accrual method of accounting for unrealized foreign exchange gains sometimes criticized?
A) Foreign exchange gains almost never occur, so there is no reason to have an accounting standard for it.
B) It violates the principle of conservatism.
C) It is not objective.
D) There is no reliable method for measuring unrealized foreign exchange gains.

Question

Quizplus · Accepted Answer

The accrual method of accounting for unrealized foreign exchange gains violates the principle of conservatism, which means that gains should not be recognized until they are realized. Since foreign exchange gains are unrealized until a transaction is completed, recognizing them before they are realized goes against this principle, making it a criticism of the accrual method in this context.

Why Is the Accrual Method of Accounting for Unrealized Foreign