Which of the following statements is incorrect?
A) An operating unit located in another country that operates as a separate going concern and is largely independent of the parent has the local currency as its functional currency and its financial statements in this case are translated using the current rate method.
B) An operating unit located in another country that functions as an extension of the parent and whose cash flows are interrelated with those of the parent has the local currency as its functional currency and its financial statements in this case are translated using the temporal method.
C) When translating from a local currency into a functional currency, the procedure is called remeasuring the financial statements.
D) When translating from a functional currency into a reporting currency, the procedure is called restating the financial statements.
E) None of the statements above; all are correct correct.

Question

Quizplus · Accepted Answer

Statement B is incorrect because when an operating unit functions as an extension of the parent and its cash flows are highly interrelated with those of the parent, the parent's currency is typically considered the functional currency, not the local currency. In such cases, the temporal method is used for translation, not because the local currency is the functional currency, but because the parent's currency is.

Which of the Following Statements Is Incorrect