Vermont Co. has one foreign subsidiary. Its translation exposure is directly affected by each of the following, except:
A) the interest rate in the country of the subsidiary.
B) the proportion of business conducted by the subsidiary.
C) its accounting method.
D) the exchange rate movements of the subsidiary's currency.

Question

​Vermont Co. has one foreign subsidiary. Its translation exposure is directly affected by each of the following, except:
A) ​the interest rate in the country of the subsidiary.
B) ​the proportion of business conducted by the subsidiary.
C) ​its accounting method.
D) ​the exchange rate movements of the subsidiary's currency.

Quizplus · Accepted Answer

Translation exposure refers to the impact of currency exchange rate movements on a company's financial statements when they are consolidated from foreign operations. It is affected by the proportion of business conducted by the subsidiary, the accounting method used for consolidation, and the exchange rate movements of the subsidiary's currency. Interest rates in the country of the subsidiary, however, directly affect economic exposure or transaction exposure rather than translation exposure.

​Vermont Co

Vermont Co