In highly inflationary economies, FASB 52 requires that the foreign entities financial statement be remeasured from the local currency "as if the functional currency were the reporting currency". The purpose of this requirement is
A)to prevent large important balance sheet accounts, carried at historical values, from having insignificant values once translated into the reporting currency at the current rate.
B)to prevent games playing in the accounting books.
C)to prevent having to restate the books at a later date.
D)none of the above

Question

Quizplus · Accepted Answer

Highly inflationary economies experience significant currency devaluation and currency fluctuations. As a result, the local currency may not be reliable as the functional currency for local entities. In such cases, remeasurement ensures that the financial statements are reported in a currency that is more stable and reliable, thereby preventing significant balance sheet accounts from losing their value due to the devaluation of the local currency.

In Highly Inflationary Economies, FASB 52 Requires That the Foreign