Which of the following correctly addresses how international accounting standards differ from U.S.GAAP as they pertain to translation of foreign financial statements using the current or functional method?
A)The difference resulting from translation is recognized in income rather than other comprehensive income.
B)The methodology varies in that historical rates are used for certain nonmonetary assets.
C)The difference resulting from translation may be recognized in income for reasons besides the parent's disposal of the foreign entity.
D)There are no differences.

Question

Which of the following correctly addresses how international accounting standards differ from U.S.GAAP as they pertain to translation of foreign financial statements using the current or functional method?
A)​The difference resulting from translation is recognized in income rather than other comprehensive income.
B)​The methodology varies in that historical rates are used for certain nonmonetary assets.
C)The difference resulting from translation may be recognized in income for reasons besides the parent's disposal of the foreign entity.​
D)There are no differences.​

Quizplus · Accepted Answer

International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP) differ in how the translation of foreign financial statements is treated. Under U.S. GAAP, the cumulative translation adjustment is recorded in other comprehensive income and is not recognized in net income until the sale or complete or substantially complete liquidation of the investment in the foreign entity. However, under IFRS, retranslation differences may be recognized in profit or loss in certain circumstances other than the disposal of the foreign operation, such as when there is a severe devaluation of a currency. This makes option C correct, as it highlights a scenario where the treatment of translation differences under IFRS can differ from U.S. GAAP, allowing for recognition in income under conditions other than the disposal of the foreign entity.

Which of the Following Correctly Addresses How International Accounting Standards