Which exchange rates are used for foreign subsidiaries with different functional currencies? Using the following abbreviations, identify which of the below are correct methods for converting inventory.
Year-end rates: YE
Average rates: AR
Historical rates: HR
$\begin{array}{lll}&\text { Temporal } & \text { Current rate } \
\text { A) } & \text { YE } & \text { AR } \
\text { B) } & \text { HR } & \text { YE } \
\text { C) } & \text { YE } & \text { HR } \
\text { D) } & \text { HR } & \text { HR }
\end{array}$

Question

Which exchange rates are used for foreign subsidiaries with different functional currencies? Using the following abbreviations, identify which of the below are correct methods for converting inventory.
Year-end rates: YE 
Average rates: AR
Historical rates: HR
$\begin{array}{lll}&\text { Temporal } & \text { Current rate } \
\text { A) } & \text { YE } & \text { AR } \
\text { B) } & \text { HR } & \text { YE } \
\text { C) } & \text { YE } & \text { HR } \
\text { D) } & \text { HR } & \text { HR }
\end{array}$

Quizplus · Accepted Answer

Under the temporal method, inventory is typically converted at historical rates (HR) because it reflects the rate at the time of acquisition. Under the current rate method, all assets and liabilities are converted at the year-end rate (YE), which includes inventory.

Which Exchange Rates Are Used for Foreign Subsidiaries with Different