Which of the following statements is correct?
A) If an organization is self-sustaining (i.e., the functional currency of the foreign operation is different than the parent), non-monetary items recorded at cost must be translated using historical rates.
B) If an organization is self-sustaining (i.e., the functional currency of the foreign operation is different than the parent), non-monetary items recorded at cost must be translated using average rates.
C) If an organization is self-sustaining (i.e., the functional currency of the foreign operation is different than the parent), non-monetary items recorded at cost must be translated using closing rates.
D)If an organization is considered an integrated foreign subsidiary (i.e., the functional currency of the foreign operation is the same as the parent), non-monetary items recorded at cost must be translated using closing rates.

Question

Quizplus · Accepted Answer

If an organization is self-sustaining, non-monetary items recorded at cost must be translated using closing rates. This is because closing rates reflect the exchange rate at the end of the reporting period and are more representative of the current value of the non-monetary items. Historical rates would not be accurate since they reflect the exchange rate at the time the items were acquired, and average rates would not reflect the changes in exchange rates that may have occurred during the reporting period. If an organization is considered an integrated foreign subsidiary, non-monetary items recorded at cost must be translated using closing rates as well.

Which of the Following Statements Is Correct