In their research published in 1988 related to translating foreign currency financial statements, Doupnik and Evans found that U.S. multinationals were biased in favor of using a foreign currency as the functional currency. What reason did the researchers give for this management decision?
A. It was easier than proving to the FASB that a subsidiary’s functional currency was the U.S. dollar.
B. Doing so allowed companies greater latitude in selecting the method of translating foreign currency financial statements.
C. This allows the use of the current method, which defers recognizing translation gains or losses in income.
D. This allows the use of the temporal method, which defers recognizing transaction adjustments in income.
Answer:C
In their research published in 1988 related to translating foreign currency financial statements, Doupnik and Evans found that U.S. multinationals were biased in favor of using a foreign currency as the functional currency. What reason did the researchers give for this management decision?
A. It was easier than proving to the FASB that a subsidiary’s functional currency was the U.S. dollar. B. Doing so allowed companies greater latitude in selecting the method of translating foreign currency financial statements. C. This allows the use of the current method, which defers recognizing translation gains or losses in income. D. This allows the use of the temporal method, which defers recognizing transaction adjustments in income.