When the current rate method is used, a lower-of-cost-or-market test of the subsidiary's assets in U.S. dollars is not necessary.

Question

Quizplus · Accepted Answer

Under the current rate method, all assets and liabilities of a foreign subsidiary are translated into U.S. dollars at the current exchange rate at the balance sheet date, which inherently reflects the market value of foreign currency denominated assets and liabilities. Therefore, a separate lower-of-cost-or-market test in U.S. dollars is not necessary.

When the Current Rate Method Is Used, a Lower-Of-Cost-Or-Market Test