When would the balance sheet exposure arising from the current rate method become realized?
A) It is realized once the financial statements of the foreign operation and the parent are consolidated.
B) It is realized any time the historical exchange rate is different from the spot rate at the balance sheet date.
C) It is realized when the foreign operation is sold at book value and the proceeds are converted into parent company currency.
D) It can never be realized because it is only the result of the choice of accounting methods and does not reflect real exposure.

Question

Quizplus · Accepted Answer

The balance sheet exposure arising from the current rate method becomes realized when the foreign operation is sold at book value and the proceeds are converted into parent company currency. This is when any gains or losses from changes in exchange rates are recognized in the parent company's income statement.

When Would the Balance Sheet Exposure Arising from the Current