The underlying principle of the current/noncurrent method is that assets and liabilities should be translated based on their maturity.
A)Current assets and liabilities are converted at the current exchange rate in effect when the cash flow associated with the asset or liability actually occurred. Non-current assets and liabilities are translated at the historical exchange rate that prevailed when the asset was recognized.
B)Current assets and liabilities, which by definition have a maturity of one year or less, are converted at the current exchange rate. Non-current assets and liabilities are translated at the historical exchange rate.
C)All assets and liabilities are converted at the current exchange rate.
D)None of the above

Question

Quizplus · Accepted Answer

The current/noncurrent method involves converting current assets and liabilities at the current exchange rate, while non-current assets and liabilities are translated at the historical exchange rate. This is based on the principle that current assets and liabilities have a maturity of one year or less, while non-current assets and liabilities have a longer maturity. Therefore, their translation should reflect their respective maturities. Option B correctly reflects this principle.

The Underlying Principle of the Current/noncurrent Method Is That Assets