Which of the following statements concerning the translation of a subsidiary’s financial statement and the subsidiary’s ratios is least accurate?
A) The statement of cash flows is not affected by the choice of translation.
B) Ratios calculated under the current rate method will not differ from those calculated under the temporal method.
C) The subsidiary’s ratios in the local currency will differ from ratios calculated after translation.
Answer B. Explanation - Ratios calculated under the current rate method will differ from those calculated under the temporal method.
Now my doubt is why not A? Temporal method and current rate method are following different approaches for non-monetary assets and liabilities. Hence, for example, translation of inventory must be different subsequently CFO. The bottom line of the cash flow may not change but the movement between the line items change. Am I wrong? Please help. Thanks in advance.