Impact of Current Rate Method on Financial Statements

Hard Multinational Operations Translation Methods

A multinational corporation, Global Corp, has subsidiary operations in the Eurozone and employs the current rate method for translation of its foreign subsidiary's financial statements into the reporting currency of USD. During the reporting period, the functional currency of the Eurozone subsidiary appreciated against the USD.

Which of the following effects on Global Corp's consolidated financial statements is most likely due to the use of the current rate method for translation?

The net income of the Eurozone subsidiary will increase in USD terms.

The shareholders' equity in USD will increase while net income remains unchanged.

The translation adjustment will result in a decrease in the cumulative translation adjustment in other comprehensive income.

Hint

Submitted14.8K

Correct12.9K

% Correct87%