Analyze the underlying conceptual differences between the temporal method of translation and the current rate method of translation. Determine how the balance sheet exposure differs under the two (2) aforementioned methods. Select the method that you believe provides the least balance sheet exposure. Provide rationale for your selection. Solution The current rate of method is used when the functional currency and the presentation currency are different and the Temporal Method is used when the functional currency and the local currency are different. Under the current rate method , all the assets and liabilities are translated at the current exchange rate and the balance sheet exposure is equal to the foreign subsidiaries net assets, Under the temporal method assets are carried at current or future value and the liabilities are remeasured at the current exchange rates. .

1. Analyze the underlying conceptual differences between the temporal method of translation and
the current rate method of translation. Determine how the balance sheet exposure differs under
the two (2) aforementioned methods. Select the method that you believe provides the least
balance sheet exposure. Provide rationale for your selection.
Solution
The current rate of method is used when the functional currency and the presentation currency
are different and the Temporal Method is used when the functional currency and the local
currency are different.
Under the current rate method , all the assets and liabilities are translated at the current exchange
rate and the balance sheet exposure is equal to the foreign subsidiaries net assets,
Under the temporal method assets are carried at current or future value and the liabilities are
remeasured at the current exchange rates.