- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 12. Multinational Operations
- Subject 4. Translation: The All-Current Method
CFA Practice Question
Which of the following statements is (are) true with respect to procedures involved in translating the financial statements of foreign subsidiaries using the all-current method.
II. All sales and expenses are translated using the average exchange rate for the period.
III. All assets and liabilities are translated using the historical exchange rates at which they were acquired or incurred.
IV. Contributed capital is always translated at the exchange rate that existed on the last day of the reporting period.
I. The income statement must be translated first before translating the balance sheet.
II. All sales and expenses are translated using the average exchange rate for the period.
III. All assets and liabilities are translated using the historical exchange rates at which they were acquired or incurred.
IV. Contributed capital is always translated at the exchange rate that existed on the last day of the reporting period.
A. II and III
B. I and II
C. II and IV
Explanation: III is incorrect because all assets and liabilities are translated using the current exchange rates, regardless of what the exchange rates were at the time they were acquired or incurred.
IV is incorrect because contributed capital is always translated at the exchange rate that existed on the date that the capital was contributed.
User Contributed Comments 4
| User | Comment |
|---|---|
| mishis | On II. I thought depreciation (an expense) is translated at the current exchange rate under all current method |
| kazec | Why (I)? |
| krunk | Hi kazec, my guess is this: because the BS is translated at the current rate, that rate needs to be the most up-to-date, ergo it needs to be done last. Just a thought... |
| aruffo | #notallsalesandexpenses |