Assume that a U.S.-based MNE has operations in Germany and that the revenues and expenses are mostly incurred in Euros.Which translation method is the MNE most likely to use?

Question

Quizplus · Accepted Answer

The current-rate method would be the most likely choice for a U.S.-based MNE with operations in Germany and most of its revenues and expenses incurred in Euros. This method involves translating all foreign currency assets and liabilities at the current exchange rate and the income statement items using the weighted average exchange rate for the period. This method best reflects the current economic reality of the foreign operations and provides a more accurate representation of the MNE's financial position and performance.

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