CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Which statement about the current rate method is true?
A. It is not acceptable under U.S. GAAP.
B. The translation gain or loss is accumulated in other comprehensive income.
C. The translation gain or loss will never be recognized in current income.
Explanation: The translation gain is reported in other comprehensive income. This is a direct debit (credit) to stockholders' equity that is not reflected in current profit. Under the temporal method, by contrast, remeasurement gains (losses) do affect current profitability.

User Contributed Comments 2

User Comment
ThePessimist Why is C wrong?
ThePessimist Oh, I see, if the subsidiary is eventually sold the translation gain will then transfer to current income as part of the gain (or loss) on sale.
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