Under FASB 52, when a net translation exposure exists,
A)a derivatives hedge is necessary to bring balance to the consolidated balance sheet after an exchange rate change.
B)a money market hedge is necessary to bring balance to the consolidated balance sheet after an exchange rate change.
C)a cumulative translation adjustment account is necessary to bring balance to the consolidated balance sheet after an exchange rate change.
D)none of the above

Question

Quizplus · Accepted Answer

Under FASB 52, a cumulative translation adjustment (CTA) account is necessary to report changes in the value of foreign currency assets and liabilities on the consolidated balance sheet. The CTA account acts as a balance sheet account that captures the gains and losses on translation of foreign currency financial statements into the reporting currency. It is not necessary to use a derivatives hedge or money market hedge to bring balance to the consolidated balance sheet after an exchange rate change.

Under FASB 52, When a Net Translation Exposure Exists