When consolidating foreign subsidiaries,the foreign subsidiary's financial numbers must be translated into the parents' currency unit.Under GAAP,if the foreign subsidiary is merely an extension of the parent,the current rate method is used.

Question

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Under GAAP, if the foreign subsidiary is considered an extension of the parent company, the temporal method is used, not the current rate method. The current rate method is used when the subsidiary operates in a local economic environment that is distinct from the parent.

When Consolidating Foreign Subsidiaries,the Foreign Subsidiary's Financial Numbers Must Be