Which of the following statements is correct?
A) If the functional currency of the foreign operation is different than the parent's functional currency, the contributed capital must be translated using closing rates.
B) If the functional currency of the foreign operation is different than the parent's functional currency, the contributed capital must be translated using average rates.
C) If the functional currency of the foreign operation is different than the parent's functional currency, the contributed capital must be translated using historical rates.
D) If the functional currency of the foreign operation is the same as the parent's functional currency, the contributed capital must be translated using average rates.

Question

Quizplus · Accepted Answer

When translating financial statements from the functional currency of a foreign operation to the presentation currency, contributed capital is translated using historical rates. This is because the amounts for contributed capital are fixed at the time of the contribution, reflecting the exchange rate at that specific point in time.

Which of the Following Statements Is Correct