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Q25 One of the key factors that differentiates the temporal method from the current rate method...

Q25 One of the key factors that differentiates the temporal method from the current rate method is that under the temporal method, assets and liabilities are reported at:

Multiple Choice

  • historical exchange rates if they are monetary in nature.

  • current exchange rates if they are monetary in nature.

  • historical exchange rates if they are nonmonetary in nature.

  • current exchange rates if they are nonmonetary in nature.

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Answer #1

In Current rate method is a method where foreign currency translation of items of financial statements is done at the current exchange rate. Foreign currency earned from other countries needed to be exchanged into the currency used when preparing the company's financial statements.

Temporal method is also known as historical method used to convert the foreign subsidiary’s currency in home currency

One of the key factors that differentiate the temporal method from the current rate method is that under the temporal method, assets and liabilities are reported at the exchange rate in effect as of the balance sheet date (historical exchange rates).

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