The general rule for translating liabilities denominated in a foreign currency into the functional currency is to:
A) first classify the liabilities into current and non-current.
B) first classify the liabilities as monetary or non-monetary.
C) translate all liabilities using the current rate existing at end of reporting period.
D) translate all liabilities using the rate current on entering into the transaction.

Question

Quizplus · Accepted Answer

The general rule for translating liabilities denominated in a foreign currency into the functional currency is to first classify the liabilities as monetary or non-monetary. Monetary liabilities are those that will require payment in a fixed or determinable amount of currency, while non-monetary liabilities involve future transfers of goods or services. Monetary liabilities are translated at the current exchange rate at the end of the reporting period, while non-monetary liabilities are translated using historical exchange rates.

The General Rule for Translating Liabilities Denominated in a Foreign