Under the U.S. dollar unit of measure approach, a decrease in the direct exchange rate always results in an adverse reporting result when the parent has a positive balance in its Investment in Subsidiary account.

Question

Quizplus · Accepted Answer

A decrease in the direct exchange rate (meaning the dollar strengthens or foreign currency weakens) could result in a positive impact on the parent's Investment in Subsidiary account if the investment is denominated in the foreign currency, as the value of the investment in USD terms could increase when revalued at the lower exchange rate.