Essco Ltd,a foreign subsidiary of Peako Corp.,has written down its inventory to current market value under a "lower of cost or market" rule. When consolidating Essco's balance sheet into Peako's balance sheet,what exchange rate should be used for the inventory under the temporal method?

Question

Quizplus · Accepted Answer

Under the temporal method, the balance sheet items are translated at different exchange rates based on their nature. Inventory is a current asset and is therefore translated at the current rate. Since Essco has written down its inventory to current market value, the current rate should be used to translate this item into Peako's balance sheet.

Essco Ltd,a Foreign Subsidiary of Peako Corp