The general rule for translating liabilities denominated in a foreign currency into the functional currency is to:
A) translate all liabilities using the current rate existing at the end of the reporting period.
B) first classify the liabilities into current or non-current.
C) first classify the liabilities as monetary or non-monetary.
D) translate all liabilities using the rate applicable when the original transaction was recorded.

Question

Quizplus · Accepted Answer

The general rule for translating liabilities denominated in a foreign currency into the functional currency is to first classify them as monetary or non-monetary. Monetary liabilities are those that are settled in cash or in other monetary assets, while non-monetary liabilities are those that are settled through non-cash means such as equity or service. Monetary liabilities should be translated using the current exchange rate at the end of the reporting period, while non-monetary liabilities should be translated using the exchange rate at the time the transaction occurred. This is because changes in exchange rates can have a significant impact on the value of monetary liabilities, while non-monetary liabilities are not as directly affected.

The General Rule for Translating Liabilities Denominated in a Foreign