Q101. Hann Company is a U.S. multinational firm with operations in several foreign countries. Hann has a 100 percent

      stake in a French subsidiary. The foreign subsidiary's local currency has appreciated against the U.S. dollar

      over the latest financial statement reporting period. In addition, the French firm accounts for inventories using

      the FIFO inventory cost-flow assumption. The net profit margin as computed under the current rate method

      would most likely be:

A)   either higher or lower than the same ratio computed under the temporal method.

B)   lower than the same ratio computed under the temporal method.

C)   higher than the same ratio computed under the temporal method.

答案和详解如下：

Q101. Hann Company is a U.S. multinational firm with operations in several foreign countries. Hann has a 100 percent

      stake in a French subsidiary. The foreign subsidiary's local currency has appreciated against the U.S. dollar

      over the latest financial statement reporting period. In addition, the French firm accounts for inventories using

      the FIFO inventory cost-flow assumption. The net profit margin as computed under the current rate method

      would most likely be:

A)   either higher or lower than the same ratio computed under the temporal method.

B)   lower than the same ratio computed under the temporal method.

C)   higher than the same ratio computed under the temporal method.

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 foreign currency gain or loss appears on the income statement under the temporal method. Hence, to make any determinations regarding the movements of this ratio, we need more information regarding the net monetary asset or liability position as of both the beginning and ending balance sheet date.