How should currency translation be done in order to conveniently compare a financial statement presented in Japanese yen to a financial statement presented in Chinese yuan?
A)The temporal method should be used.
B)The historical exchange rates should be used to convert financial statement amounts.
C)All amounts should be converted at the current exchange rate.
D)Current year statements should be converted at the current exchange rate, and prior year statements should be converted at prior year exchange rate.

Question

Quizplus · Accepted Answer

In order to conveniently compare two financial statements presented in different currencies, all amounts should be converted at the current exchange rate. This eliminates the impact of any fluctuation in exchange rates over time and presents a current and uniform view of the financial position and performance of the companies involved. The temporal method (A) and historical exchange rates (B) may not provide an accurate reflection of the current situation. While choice D is a valid option, it is more complicated and may not be necessary if the objective is to simply compare two financial statements.

How Should Currency Translation Be Done in Order to Conveniently