Under the Current Rate Method:
A)Transaction exposure is greatest.
B)The relationship of balance sheet items is best preserved.
C)Income statement items are translated using a mix of rates.
D)Income statement items are translated using average rates.

Question

Quizplus · Accepted Answer

The current rate method preserves the relationship of balance sheet items by using the current exchange rate to translate all assets and liabilities. Therefore, option B is correct. Option A is incorrect because transaction exposure is the highest under the temporal method, not the current rate method. Option C and D are also incorrect because income statement items are translated using the current exchange rate in the current rate method.