CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

The following statements are true with regards to accounting for foreign currency translation using the temporal method. It is

I. Also referred to as remeasurement.
II. Used to convert the local currency data into the functional currency.
III. Used to convert the functional currency data into the parent company currency.
IV. Also referred to as translation.
A. I and II
B. I and III
C. III and IV
Explanation: Remeasurement applies to the temporal method, whereas the all-current method is known as the translation process, and is used to describe the conversion of the functional currency data into the parent company (reporting) currency.

User Contributed Comments 4

User Comment
danlan2 All-current method is known as translation process, and used to describe the conversion of the functional currency data into reporting currency. This questions is talking about temporal method, which is used to convert local currency data to functional currency, so the answer is I and II.
volkovv The question is quite straightforward. I agree that all-current method is used to describe the conversion of the functional currency into reporting currency. Or say it in other way functional currency into parent currency (you have to remember that reporting currency = parent currency).
wollogo I think both 2&3 are correct. You would convert local curreny to functional currency using the temporal method if the local currency is inflationary (making 2 correct). 3 is also correct as if the functional currency was the same as reporting currency you would also use temporal method.
rana1970 no wollogo, if subsidiary has functional currency,then no need to use temporal method. Translation is required instead. So iii is wrong.
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