U.S. GAAP: Functional currency, Local currency, and Reporting currency

(Background)

Company	Description	Country	Currency
U	A U.S. parent company	US	USD
F	A Foreign subsidiary	F1	FC1
		F2	FC2

(1) operating, financing, and investing decisions related to the company F's operations are typically made by the company F's local management located in the foreign country F1.
(2) some of F1's accounts receivable are denominated in a different foreign currency called the FC2.

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(Question)
Which method is the best to use to translate the FC2 receivables into FC1, according to U.S. GAAP?

A. The current rate method.
B. The temporal method.
C. The method will depend on inflation.

Answer: B

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Temporal method

Company	Description	Country	Currency	Each currency is:
U	A U.S. parent company	US	USD	Reporting currency
F	A Foreign subsidiary	F1	FC1	Functional currency (*)
		F2	FC2	Local currency

(*) Because the company F is an independent subsidiary.

Under U.S. GAAP, first remeasure the FC2 receivables from FC2 to FC1 using the temporal method.