Question

Homeko, Inc. is located in the U.S., but it has subsidiaries in Germany. When the euro appreciates relative to the U.S. dollar, what is the direction of the translation adjustment to consolidate Homeko's financial statements?

A. When there is net asset exposure, the translation adjustment will be positive.
B. When there is net liability exposure, the translation adjustment will be positive.
C. The direction of the adjustment is indeterminate.
D. There will be no adjustment necessary unless the difference is realized.

Answer 1

A. When there is net asset exposure, the translation adjustment will be positive.

Step-by-step explanation:

correct answer is When there is net asset exposure, the translation adjustment will be positive. because

When there is a net asset risk, the translation adjustment is positive.

The euro has an exchange advantage rather than a dollar versus the dollar. So with a net asset risk, the translation adjustment is positive