Question

10) Which of the following statements is correct? Multiple Choice a) If the functional currency of...

10) 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, depreciation and amortization must be translated using closing rates

  • b) If the functional currency of the foreign operation is different than the parent's functional currency, depreciation and amortization are translated using average rates.

  • c) If the functional currency of the foreign operation is the same as the parent's functional currency, depreciation and amortization must be translated using closing rates.

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Answer #1

As per the relevant Accounting standard 21

When the currency of parent company and subsidiary company is different then it should translate into reporting currency.

When the transaction relate to revenue, incomes,gains, lossess then it should translate into the currency rate on which the transaction take place but it should not possible to record all the currency rate on all dates So it standard says to take average rate.

As per the given question option B is correct.

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