If British Entity (AE) enters into a transaction with Portuguese Entity (PE) that is denominated in PE's currency, how is the transaction reflected in the accounting records of AE?
A) Converted to the currency of AE at the date of purchase.
B) Recorded in the currency of PE with no translation.
C) Converted to the currency of AE at year-end at the then year-end exchange rates.
D) Converted to the currency of PE based on the average foreign exchange rate for the month prior to the purchase.

Question

Quizplus · Accepted Answer

Transactions in foreign currencies are converted to the reporting entity's functional currency using the exchange rate at the date of the transaction, allowing for consistent financial reporting and comparison.

If British Entity (AE) Enters into a Transaction with Portuguese