In cases of operations located in highly inflationary economies:
A)The reporting currency of the U.S.parent-the U.S.dollar-should be used as the foreign entity's functional currency.
B)The foreign currency should be used as the functional currency with a footnote to the financials displaying what the earnings would have been using the U.S.dollar as the functional currency.
C)The foreign currency should be used as the functional currency with a single line item-foreign translation-reporting the adjustment using the U.S.dollar as the functional currency.
D)None of the choices are correct.

Question

Quizplus · Accepted Answer

In highly inflationary economies, the reporting currency of the U.S. parent (the U.S. dollar) should be used as the foreign entity's functional currency. This approach helps to provide a more stable basis for financial reporting.

In Cases of Operations Located in Highly Inflationary Economies