Under the current rate method of translating foreign currency financial statements,what is the amount of the balance sheet exposure?
A)It is equal to the amount of assets recorded by the subsidiary.
B)It is equal to the amount of liabilities recorded by the subsidiary.
C)It is equal to total assets minus total liabilities.
D)It is equal to total assets plus total liabilities.

Question

Quizplus · Accepted Answer

The balance sheet exposure refers to the net assets of the subsidiary that are exposed to the translation risk. It is calculated as total assets minus total liabilities, as these are the items that are subject to translation adjustments. Therefore, option C is correct. Option A and B only consider either assets or liabilities separately, while option D includes all items in the balance sheet, including equity, which is not subject to translation adjustments.

Under the Current Rate Method of Translating Foreign Currency Financial