Question

Which of the following statements is correct?

Multiple Choice

• a) If the functional currency of the foreign operation is different than the parent's functional currency, dividends must be translated using closing rates.

• b) If the functional currency of the foreign operation is different than the parent's functional currency, dividends must be translated using historical rates.

• c) If the functional currency of the foreign operation is different than the parent's functional currency, dividends must be translated using average rates.

• d) If the functional currency of the foreign operation is the same as the parent's functional currency, dividends must be translated using average rates.

Answer 1

In the given case, the discussion is about the translation of dividends

Let us first, know about whether the dividends are come under monetary item or non-monetary item.

As per international accounting standards - 21, the dividends comes under monetary item.

As per international accounting standards -21, all the monetary items are to be translated using the closing rates

In the given case, the option A, if the functional currency of the foriegn operation is different than the parent's funtional currency, dividends must be translated using closing rates.

The correct answer is option A.

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