A company has translated its foreign subsidiary's financial statements using the temporal method. What is the accounting treatment for exchange gains and losses arising from previous years?

A) Reported as equity
B) Reported in other comprehensive income
C) Reported in consolidated net income
D) Included in opening consolidated retained earnings

Question

Maria Ocegueda · Accepted Answer

Final Answer : D, Explanation :  Exchange gains and losses arising from previous years are included in opening consolidated retained earnings when using the temporal method of translation. This is because the temporal method requires the use of historical exchange rates for certain assets and liabilities, and any differences between these historical rates and the current rate are recognized as gains or losses in the current period. However, any gains or losses from previous periods that have not been recognized in the subsidiary's financial statements are already reflected in the opening retained earnings balance.

Definitions

Learning Objectives

Learning Objectives

Related questions