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Translation exposure (accounting exposure) affects primarily:
AThe interest rate parity computation
BCash receivables denominated in local currency (within the standard regulatory framework)
CDomestic-only operating cash flows
DBook value of foreign-currency assets and liabilities on consolidation
Answer & Solution
Correct answer: D. Book value of foreign-currency assets and liabilities on consolidation
1. Identify what the question asks: this concept maps to translationexposure (§10.2).
2. Apply the framework or formula relevant to the topic.
3. Eliminate distractors and arrive at the correct option (D).
_Source: ICAI BoS CA Final Paper 2, Ch 10 "Foreign Exchange Exposure and Risk Management"_
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