Current Rate Method of Currency Translation

Easy Multinational Operations Translation Methods

During the preparation of financial statements for a multinational company, it is crucial to correctly translate the foreign subsidiary's financial results into the parent company's reporting currency. One commonly used translation method is the current rate method.

Which of the following statements correctly describes the current rate method of currency translation?

Under the current rate method, all assets and liabilities are translated at the current exchange rate, while revenues and expenses are translated at the historical exchange rate.

Under the current rate method, both the balance sheet accounts and the income statement accounts are translated at the current exchange rate.

Under the current rate method, all income and expenses are translated at the weighted average exchange rate for the reporting period.

Hint

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