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Basic Question 1 of 7

Which one of the following translation methods has as its basic assumption the premise that a company's net investment in a foreign operation is exposed to foreign exchange risk?

A. all-current method.
B. average rate method.
C. temporal method.
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User Contributed Comments 2

User Comment
TreasureH Net investment includes monetary and nonmonetary assets.
quanttrader whereas temporal method is only concerned with monetary assets
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I used your notes and passed ... highly recommended!
Lauren

Lauren

Learning Outcome Statements

compare the current rate method and the temporal method, evaluate how each affects the parent company's balance sheet and income statement, and determine which method is appropriate in various scenarios;

calculate the translation effects and evaluate the translation of a subsidiary's balance sheet and income statement into the parent company's presentation currency;

CFA® 2025 Level II Curriculum, Volume 2, Module 12.