Question

When exchange rates change, the value of a foreign subsidiary's assets and liabilities that are denominated in a foreign currency change Multiple Choice

a.when they are viewed from the perspective of the subsidiary firm.
b.none of the options
c.when they are viewed from the perspective of the parent firm.
d.but this is only of material concern if the parent firm is liquidating the subsidiary in a bankruptcy and is forced to realize the value of the assets and liabilities at the current exchange rate.

Answer 1

Answer:

The correct option is C,when they are viewed from the perspective of the parent firm.

Explanation:

In translating the foreign currency denominated subsidiary into parent's company presentation currency,the values of the subsidiary assets and liabilities change in order that the group financial performance(income statement) and position(balance sheet ) can be presented in one single uniform currency such that it is much easier for stakeholders to view the combined entity results in one single document.

This would accord the stakeholders to take important decisions on the entity as whole ,for instance a buy/divest decision.