Under U.S. GAAP, what method is required to account for foreign currency transactions?
A) A one-transaction perspective must be used.
B) The two-transaction perspective must be used.
C) A sale is not recorded until payment is received and converted to U.S. dollars.
D) A sale is not recorded until payment is received in the foreign currency.

Question

Quizplus · Accepted Answer

Under U.S. GAAP, the two-transaction perspective must be used to account for foreign currency transactions. This method involves recording the transaction at the exchange rate at the date of the transaction and then adjusting for any exchange rate changes between the transaction date and the settlement date. This ensures that the financial statements accurately reflect the company's exposure to foreign currency fluctuations. The other options listed are not in accordance with U.S. GAAP requirements.

Under US GAAP, What Method Is Required to Account for Foreign