21.q

Porter Company, a U.S. GAAP reporting company is trying to determine the functional currency of one of its subsidiaries. After considering authoritative guidelines, the results still are mixed. Porter Company should choose the functional currency:

Multiple Choice

• that results in the highest translated net asset exposure.

• based on management judgment.

• that results in the lowest translated net asset exposure.

• of the economy with the highest proportion of cash flows.

22.q

Which of the following is not correct with regard to the translation of a self-contained foreign subsidiary?

Multiple Choice

• For a material transaction, the rate used for translation is the exchange rate in effect on the date the transaction occurred.

• The exchange rate used for translating the balance sheet is the weighted average rate over the statement period.

• The effect of changes in exchange rates on future dollar cash flows is uncertain.

• The balance sheet ratios are not impacted by the translation to the parent company's currency.