Financial Statements of Self-Sustaining Foreign Operations

A

The statement is generally true.

The current rate method is a translation method used for converting the financial statements of a foreign operation into the reporting currency. The method involves the translation of all assets and liabilities of the foreign operation using the exchange rate at the end of the reporting period.

Under the current rate method, the income statement items are translated using the average exchange rate for the period, while the balance sheet items are translated using the closing exchange rate.

This method is appropriate for self-sustaining foreign operations, where the foreign operation is considered to be a separate and self-contained business entity. The self-sustaining foreign operation can generate sufficient cash flows to support its operations and debt obligations without relying on the parent company's resources.

However, it is important to note that the current rate method may not be appropriate for all foreign operations. In certain situations, other methods such as the temporal method or the functional currency method may be more suitable.

In conclusion, the statement is generally true, but it is important to consider the specific circumstances of each foreign operation to determine the appropriate method for translating financial statements.