When the parent company of a foreign subsidiary believes that all of its investment in the subsidiary is exposed to foreign exchange risk, what method of translation should be used in consolidating the financial statements?
A) Current rate method
B) Current/noncurrent method
C) Monetary/nonmonetary method
D) Temporal method

Question

Quizplus · Accepted Answer

The current rate method is used when the entire investment in a foreign subsidiary is exposed to foreign exchange risk, as it translates all assets and liabilities at the current exchange rate.

When the Parent Company of a Foreign Subsidiary Believes That