Assuming that a foreign entity is deemed to be operating in an environment dominated by the local currency, the entity's assets are translated using
A)the current rate.
B)a simple average rate.
C)a weighted average rate.
D)a historical rate.

Question

Assuming that a foreign entity is deemed to be operating in an environment dominated by the local currency, the entity's assets are translated using
A)​the current rate.
B)​a simple average rate.
C)​a weighted average rate.
D)​a historical rate.

Quizplus · Accepted Answer

When a foreign entity is operating in an environment dominated by the local currency, its assets should be translated using the current exchange rate. This is because the current exchange rate reflects the most accurate and up-to-date value of the local currency compared to the entity's reporting currency. Using a historical rate, a simple average rate or a weighted average rate may not accurately reflect the current value of the foreign entity's assets.

Assuming That a Foreign Entity Is Deemed to Be Operating