[5] which of the following is a component of other comprehensive income? a. minimum accrual of vacation pay. b. cumulative currency-translation adjustments. c. changes in market value of inventory. d. unrealized gain or loss on trading securities.

The correct answer is B. Cumulative currency-translation adjustments.

Explanation:

A cumulative translation adjustment (CTA) is an entry in the comprehensive income section of a translated balance sheet that summarizes the gains / losses resulting from changes in exchange rates over the years. A CTA entry is required under rule No. 52 of the Financial Accounting Standards Board (FASB) as a way to help investors differentiate between actual operating gains / losses and those generated through translation.

By knowing what a company has earned or lost through its daily business operations, rather than through an accounting practice, investors are better able to make sound financial decisions. Accumulated adjustments for conversion are an integral part of the financial statements of companies with exposure to international markets.

The CTA is an item within an accounting statement or balance sheet that handles any gain or loss that has occurred due to participation in foreign currency markets or activities. The individual item is clearly recorded, separating the information from other gains or losses. The CTAs provide additional information on the current state of the business, providing valuable information to both internal employees and shareholders.

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