One way to categorize risks is to divide them into two groups, one dealing with specific transactions and the other with ongoing operations. Which of the following statements is/are correct regarding these risks?
A) Continuing risks arise in connection with aggregated items in the company's financial statements whose values are affected by changing exchange rates, interest rates, or commodity prices.
B) Discrete risks, which are related to specific transactions, relate to real, economic gains and losses that must flow through the income statement when they are realized.
C) Accounting exposures, related to the effects of the different currency translation methods, create real economic gains and losses for the firm and, hence, affect its value.
D) All of the statements above are correct.
E) Only statements a and b are correct.

Question

Quizplus · Accepted Answer

Continuing risks indeed relate to aggregated items in financial statements affected by changing rates, and discrete risks are associated with specific transactions that impact the income statement upon realization. However, accounting exposures do not create real economic gains or losses but rather impact how financial results are reported.

One Way to Categorize Risks Is to Divide Them into Two