Transaction gains and losses that result from adjusting assets and liabilities denominated in a currency other than the functional currency must appear on the foreign unit's income statement unless the gains or losses are attributable to
A)foreign currency transactions that are designated as an economic hedge of a net investment in a foreign entity
B)intercompany foreign-currency transactions that are of a short- term nature
C)foreign-currency transactions that involve currency speculation
D)the prospect of government intervention using currency controls

Question

Quizplus · Accepted Answer

Transaction gains and losses that result from adjusting assets and liabilities denominated in a currency other than the functional currency must appear on the foreign unit's income statement. However, gains or losses attributable to foreign currency transactions that are designated as an economic hedge of a net investment in a foreign entity can be excluded and recorded as a component of other comprehensive income.

Transaction Gains and Losses That Result from Adjusting Assets and Liabilities