10 d out of uestion Why is the two-transaction perspective used for recording foreign currency transactions under U.S. GAAP? a. U.S. GAAP requires conservatism in financial reporting. O b. The two-transaction perspective is not required under IFRS. O c. Management made two decisions: one to sell and another to extend credit in a foreign currency. O d. All other methods are too easy to use and therefore highlight the essence of the transaction. 19 d Out of question Which of the following statements is true of the relationship between foreign currency transactions, exchange rate changes, and foreign exchange gains and losses? O a. In an export sales, appreciation of the foreign currency causes a foreign exchange gain. O b. In an import purchase, appreciation of the foreign currency causes a foreign exchange gain. In an export sales, depreciation of the foreign currency causes a foreign exchange gain. d. In an import purchase, depreciation of the foreign currency causes a foreign exchange loss. C. 8 ut of uestion What term is used for an option with a positive intrinsic value? a. Over the counter O b. In the money c. Put option O d. Call option n7 -d out of question What is the requirement for reporting derivatives under international accounting standards and U.S. GAAP? a. They must be shown on the balance sheet at fair value. b. They may be shown on the balance sheet or they may be treated as off- balance sheet investments. O c. They may be shown on the balance sheet at historical cost or at net realizable value. O d. They must be shown on the balance sheet at historical cost. 6 d out of question What is foreign exchange risk exposure? O a. Losses caused by paying for purchased goods in a foreign currency O b. The possibility of a loss because of changes in the value of a foreign currency O c. All of the above O d. Losses caused by receiving payment in a foreign currency for goods sold