Impact of Currency Translation Adjustments

Easy Multinational Operations Impact On Financial Statements

Consider a multinational corporation that operates in various countries with different currencies. The company is reviewing its financial statements to assess the impact of currency translation adjustments on its consolidated financial results. In particular, the company has reported a change in its foreign subsidiary's value due to fluctuations in exchange rates.

Which of the following statements correctly describes the impact of currency translation adjustments on the financial statements?

Currency translation adjustments are recognized in the income statement as part of operating income.

Currency translation adjustments are reported in other comprehensive income and affect the equity section of the balance sheet.

Currency translation adjustments directly increase or decrease the cash flows reported in the cash flow statement.

Hint

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