Why must the two-transaction perspective be used for recording foreign currency transactions under U.S. GAAP?
A) The two-transaction perspective is required under IFRS.
B) U.S. GAAP requires conservatism in financial reporting.
C) All other methods are excessively complicated to use and therefore obscure the essence of the transaction.
D) Management made two decisions: one to sell and another to extend credit in a foreign currency.

Question

Quizplus · Accepted Answer

The two-transaction perspective is used under U.S. GAAP because management made two decisions: one to sell and another to extend credit in a foreign currency. This approach separates the two transactions and allows for more accurate recording and reporting of the transactions.

Why Must the Two-Transaction Perspective Be Used for Recording Foreign