Of the following methods for translating foreign currency financial statements, which one maintains the underlying valuation method (i.e. historical cost or current value) used by the foreign subsidiary?
A) Current rate method
B) Current/Non-current method
C) Temporal method
D) Monetary/Non-monetary method

Question

Quizplus · Accepted Answer

The temporal method maintains the underlying valuation method used by the foreign subsidiary, as it distinguishes between monetary and non-monetary items and translates them differently. Monetary items, such as cash and accounts payable, are translated using the current exchange rate, while non-monetary items, such as inventory and property, are translated at their historical cost. The other methods do not maintain the underlying valuation method used by the foreign subsidiary.

Of the Following Methods for Translating Foreign Currency Financial Statements