The underlying principle of the monetary/nonmonetary method is
A)assets and liabilities should be translated based on their maturity.
B)monetary balance sheet accounts should be translated at the spot rate; nonmonetary accounts are translated at the historical rate in effect when the account was first recorded.
C)monetary accounts are translated at the current exchange rate; other accounts are translated at the current exchange rate if they are carried on the books at current value; items carried at historical cost are translated at historic exchange rates.
D)all balance sheet accounts are translated at the current exchange rate,except stockholder equity.

Question

Quizplus · Accepted Answer

The monetary/nonmonetary method distinguishes between monetary items (cash, receivables, payables, etc.) which are translated at the current exchange rate (spot rate), and nonmonetary items (inventory, fixed assets, etc.) which are translated at the historical exchange rate. This method reflects the principle that monetary items are affected by changes in exchange rates due to their nature of being fixed in amount, whereas nonmonetary items, being measured in terms of physical units or historical costs, are not directly affected by current exchange rate fluctuations.

The Underlying Principle of the Monetary/nonmonetary Method Is