Assuming that a foreign entity is deemed to be operating in an environment dominated by the local currency, the entity's capital stock is translated using
A)the current rate.
B)a simple average rate.
C)a weighted average rate.
D)a historical rate.

Question

Assuming that a foreign entity is deemed to be operating in an environment dominated by the local currency, the entity's capital stock is translated using
A)​the current rate.
B)​a simple average rate.
C)​a weighted average rate.
D)​a historical rate.

Quizplus · Accepted Answer

Capital stock is translated using the historical rate because it reflects the value at the time the capital was contributed or invested, not affected by subsequent exchange rate fluctuations.

Assuming That a Foreign Entity Is Deemed to Be Operating