Which of the following statements about the temporal method is true?
A)The accounting exposure is always a net asset balance.
B)The accounting exposure is always a net liability balance.
C)The proportionate amounts of various assets and liabilities change after the statement of financial position is translated.
D)The temporal method and the current rate method both yield the same exchange gain or loss.

Question

Quizplus · Accepted Answer

The temporal method involves translating assets and liabilities at historical exchange rates, while using the current exchange rate for income and expenses. This can lead to a change in the proportionate amounts of various assets and liabilities, thus statement (C) is true. The accounting exposure can be a net asset or net liability balance depending on the specific circumstances, so statements (A) and (B) are untrue. The temporal method and the current rate method can yield different exchange gains or losses, therefore statement (D) is untrue.

Which of the Following Statements About the Temporal Method Is