Question
In its annual report, the Swedish company, Volvo, discloses the following information about its policy for dealing with foreign currencies: In preparing the consolidated financial
In its annual report, the Swedish company, Volvo, discloses the following information about its policy for dealing with foreign currencies: In preparing the consolidated financial statements, all items in the income statements of foreign subsidiaries and joint ventures (except subsidiaries in highly inflationary economies) are translated to Swedish kronor at the average exchange rates during the year (average rate). All balance sheet items except net income are translated at exchange rates at the respective year-ends (current year). Monetary items in the balance sheet are translated at year-end rates and nonmonetary balance sheet items and corresponding income statement items are translated at rates in effect at the time of acquisition (historical rates). Other income statement items are translated at average rates.
Translation differences are credited to, or charged against, income in the year in which they arise. What is the translation methodology that Volvo uses? (3 points)
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