The appropriate exchange rate for translating a plant asset in the balance sheet of a foreign subsidiary in which the functional currency is the U.S. dollar is the:

Question

Quizplus · Accepted Answer

When the functional currency is the U.S. dollar, assets and liabilities should be translated using the current exchange rate except for plant assets (and other non-monetary assets), which should be translated at the historical exchange rate in effect at the date of acquisition. This is because plant assets are recorded at their historical cost, and translating them at the historical rate maintains this cost principle in the translated financial statements.

The Appropriate Exchange Rate for Translating a Plant Asset in the Balance