Final answer:
The correct answer is option C. A foreign currency payable should be reported on the balance sheet in home country currency at a revalued amount that reflects the change in foreign currency exchange rate since the date of purchase, not at the historical cost or based on future expectations.
Step-by-step explanation:
At the balance sheet date, a foreign currency payable arising from an import purchase should be reported on the balance sheet in home country currency by using option C: a revalued amount to reflect the change in foreign currency exchange rate since the date of purchase. This is because in international commerce, the exchange rates can fluctuate significantly over time, impacting the cost of transactions and the value of foreign currency payables and receivables on the balance sheet. Companies need to ensure that their financial statements accurately reflect the current value of their assets and liabilities. Thus, a receivable or payable must be adjusted to represent the current market value of the foreign currency at the time of the financial statement. By doing so, it provides a more accurate financial picture of the company's financial position.
For example, if a U.S. company has a payable in euros, and the value of the euro increases relative to the U.S. dollar after the transaction but before the balance sheet date, the payable would be adjusted upward in U.S. dollar terms to reflect this increased cost. Conversely, if the euro depreciates, the payable would be adjusted downward. This practice is based on the accounting standard which requires the use of the current exchange rate for translation of foreign currency transactions at the balance sheet date.