View the step-by-step solution to:


When accounting for foreign operations, companies prepare their financial statements using local currency and

accounting standards. However, when preparing consolidated financial statements, parent companies must report using the currency and standards of their home country. This requires parent companies to restate and translate their foreign subsidiaries' financial statements into the proper reporting currency. The effect of this is often referred to as translation (or accounting) exposure. The translation of financial statement items between foreign currencies will result in foreign exchange gains or losses, depending on the rules used. These gains and losses do not involve actual cash flows; they are only changes "on paper." When translating foreign currency financial statements, international accountants predominantly use one of the following four methods: current/noncurrent method, monetary/non-monetary method, temporal method, and current rate (also called closing rate) method. Companies choose among these methods based on reasons such as their objectives, ease of use, applicability to their company, and frequency of use by other companies in their industry.

Select one of the four methods of currency translation. Consider the impact of your selected foreign currency translation method on translation exposure and international financial reporting. Think about whether there should be authoritative rules mandating which translation method to use and where the translation adjustment should be reported in consolidated financial statements.

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.


Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes