If the functional currency is the local currency of a foreign subsidiary,what exchange rates should be used to translate the items below,assuming the foreign subsidiary is in a country which has not experienced hyperinflation over three years?
A) Option A
B) Option B
C) Option C
D) Option D

Question

If the functional currency is the local currency of a foreign subsidiary,what exchange rates should be used to translate the items below,assuming the foreign subsidiary is in a country which has not experienced hyperinflation over three years? 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Quizplus · Accepted Answer

Option B provides the appropriate exchange rates to translate items in the financial statements when the functional currency is the local currency of a foreign subsidiary. It shows the current exchange rate for assets and liabilities (end-of-period rate) and the average exchange rate for revenues and expenses (average rate). Option A shows only the end-of-period rate for all items, which is not appropriate for translating revenues and expenses. Option C shows only the average rate for all items, which is not appropriate for translating assets and liabilities. Option D shows the historical exchange rate, which is not relevant for translating current financial statements.

If the Functional Currency Is the Local Currency of a Foreign