Impact of Currency Translation on Financial Statements

A multinational corporation (MNC) operates in several countries, which requires it to consolidate its financial statements across different currencies. When a subsidiary reports its financials in a foreign currency, the MNC must convert these figures into its functional currency for consolidation.

This conversion process can impact the MNC's financial statements, particularly the balance sheet and income statement, due to exchange rate fluctuations.

Which of the following statements is true regarding the impact of currency translation on financial statements?