Q1. Which of the following asset or liability values is likely to be the most understated in a hyperinflationary economy if translation

    occurs under the all-current method?

A)   Accounts receivable.

B)   A plant purchased several years ago.

C)   Dividends payable.

Q2. In a hyperinflationary economy, translation under the all-current method will most likely result in relatively:

A)   high balance sheet values for long term assets.

B)   high translation gains.

C)   low balance sheet values for long term liabilities.

Q3. The temporal method (remeasurement) is preferred to the all-current method (translation) in hyperinflationary economies

    because remeasurement:

A)   results in non-monetary asset values that are a better proxy for the economic values of those assets (versus the all-current method).

B)   is easier than translation to perform under hyperinflation.

C)   provides better conversions of subsidiary revenues.

Q4. Which translation method should be used under a hyperinflationary economy?

A)   Temporal, because all non-monetary accounts are re-measured at the historical rate.

B)   All-current, because dividends are translated at the rate that applied when they were issued.

C)   Monetary/non-monetary, because all monetary accounts are translated at the historical rate.

Q5. For a subsidiary in a hyperinflationary economy, the functional currency should be the:

A)   Local currency.

B)   Parent's currency.

C)   Subsidiary's operating currency.

答案和详解如下：

Q1. Which of the following asset or liability values is likely to be the most understated in a hyperinflationary economy if translation

    occurs under the all-current method?

A)   Accounts receivable.

B)   A plant purchased several years ago.

C)   Dividends payable.

Correct answer is B)

The basis for using the all current method is when Functional Currency is NOT the same as Parent's Presentation (reporting) Currency. The basis for using the temporal method is when Functional Currency = Parent's Presentation Currency.
The accounts receivable and dividends payable will each have book values that are closer to their market values than a plant purchased many years ago.

Q2. In a hyperinflationary economy, translation under the all-current method will most likely result in relatively:

A)   high balance sheet values for long term assets.

B)   high translation gains.

C)   low balance sheet values for long term liabilities.

Correct answer is C)

The basis for using the all current method is when Functional Currency is NOT the same as Parent's Presentation (reporting) Currency. The basis for using the temporal method is when Functional Currency = Parent's Presentation Currency.
In a hyperinflationary economy, translation under the all-current method will most likely result in relatively low balance sheet values for assets and liabilities. Translation losses will also occur.

Q3. The temporal method (remeasurement) is preferred to the all-current method (translation) in hyperinflationary economies

    because remeasurement:

A)   results in non-monetary asset values that are a better proxy for the economic values of those assets (versus the all-current method).

B)   is easier than translation to perform under hyperinflation.

C)   provides better conversions of subsidiary revenues.

Correct answer is A)

The basis for using the all current method is when Functional Currency is NOT the same as Parent's Presentation (reporting) Currency. The basis for using the temporal method is when Functional Currency = Parent's Presentation Currency.
Remeasurement results in non-monetary asset values that are a better proxy for the economic values of those assets than those obtained under the all-current method. Both remeasurement and translation convert revenues and SG&A at the average rate so there could be no clear preference when considering these measures.

Q4. Which translation method should be used under a hyperinflationary economy?

A)   Temporal, because all non-monetary accounts are re-measured at the historical rate.

B)   All-current, because dividends are translated at the rate that applied when they were issued.

C)   Monetary/non-monetary, because all monetary accounts are translated at the historical rate.

Correct answer is A)

The basis for using the all current method is when Functional Currency is NOT the same as Parent's Presentation (reporting) Currency. The basis for using the temporal method is when Functional Currency = Parent's Presentation Currency.
The temporal method is more appropriate because all non-monetary accounts are remeasured at the historical rate.

Q5. For a subsidiary in a hyperinflationary economy, the functional currency should be the:

A)   Local currency.

B)   Parent's currency.

C)   Subsidiary's operating currency.

Correct answer is B)

The basis for using the all current method is when Functional Currency is NOT the same as Parent's Presentation (reporting) Currency. The basis for using the temporal method is when Functional Currency = Parent's Presentation Currency.
The functional currency should be the parent's currency.

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