Is Schweser wrong? following, reporting, question, between, correct

king_kong

I thought this was a pretty easy/basic question…Isn’t their explanation wrong?
Which of the following ratios is unaffected by the choice between translation under the all-current method and remeasurement under the temporal method?
A) Accounts payable turnover.
B) Current ratio.
C) Quick ratio.
Your answer: B was incorrect. The correct answer was C) Quick ratio.
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.
All of the components of the quick ratio (cash and cash equivalents, accounts receivable, and accounts payable) are converted at the same rate under both methods so the ratio is unaffected by the method. The current ratio is the same as the quick ratio except it also contains inventory which is translated at the historical rate with the temporal method and at the current rate with the all-current method.

bapswarrior

Alright so under temporal…all monetary assets/liabs are remeasured at the current rate (nonmonetary uses historical). All-current translates both at the current rate.
So the quick ratio isnt affected because the inventory gets taken out?
I’ve been staring at this too long. This is the one question I got wrong in the reading quiz.

nitoha

That’s right. Inventory is not a monetary asset and is remeasured at the historical rate, so if you the the current assets under all current, it will be different from the current assets under temporal, unless the inventory figure is removed.

tango_gs

quick ratio = [current assets - inv] / [current liabilities]
the same exchange rate will be used in the numerator and denominator under the all current method. the same goes for temporal because both numerator and denominator are monetary. basically you’re multiplying both the numerator and denominator by the same constant so it makes no difference which method you use because they cancel out.
keep in mind that this is not because the temporal method uses the same rate as the all-current method, but because no matter which method you use, the constant you’ll be multiplying by will be consistent in the numerator and denominator for this particular ratio.