In translating statements of a foreign subsidiary that are reported in a functional currency, the stockholders' equity accounts, other than retained earnings, are translated at which of the following rates?

A. Historical exchange rates.
B. Current exchange rate.
C. Weighted-average exchange rate.

Correct Answer: A

Stockholders' equity accounts, other than retained earnings, are translated at historical exchange rates. The appropriate rate is the rate on the latter of the date the parent company acquired the investment in the foreign entity or the date the subsidiary had the stockholders' equity transaction. The subsidiary's translated retained earnings are rolled forward from the previous period, updating the balance for the current period's income earned and dividends declared. The other balance sheet accounts (assets and liabilities) are translated at the spot rate on the balance sheet date. The income statement should be translated at a weighted-average exchange rate, for all practical purposes.