When a foreign entity has the foreign currency as its functional currency,it uses which exchange rate to translate revenues and expenses in the income statement?
A) the average exchange rate during the period
B) the end of the period exchange rate
C) the historical exchange rate
D) the exchange rate on the date the asset or liability was obtained

Question

Quizplus · Accepted Answer

The average exchange rate during the period is used to translate revenues and expenses in the income statement when the foreign currency is the functional currency. This approach smooths out fluctuations in exchange rates over the period.

When a Foreign Entity Has the Foreign Currency as Its