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Basic Question 4 of 7
A US-based company has a subsidiary located in Germany. The Euro is the functional currency of the subsidiary. What exchange rate should be used to translate the following items reported in the subsidiary's year-end financial statements?
B. Historical rate - Current rate - Current rate.
C. Current rate - Historical rate - Average rate.
Inventory - Machinery - Depreciation.
A. Current rate - Current rate - Average rate.
B. Historical rate - Current rate - Current rate.
C. Current rate - Historical rate - Average rate.
User Contributed Comments 3
| User | Comment |
|---|---|
| tkorchmaros | use current exchange rate on all assets and liabilities. use the average rate to translate the income statement |
| danlan2 | Historical is used for exchanged rate, temporal method versus all-current method, historical rate is more used in temporal method. |
| jmcarr02 | Instead of the average rate applied to the depreciation you could also have used the historical rate. Both rates accepted. |
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Lina
Learning Outcome Statements
analyze how the current rate method and the temporal method affect financial statements and ratios;
CFA® 2026 Level II Curriculum, Volume 2, Module 12.