Answer: a net asset balance sheet exposure and the foreign currency strengthens.

## Explanation **Positive translation adjustment** occurs when: - The subsidiary has a **net asset balance sheet exposure** (assets > liabilities) - And the **foreign currency strengthens** against the parent's currency **How it works:** - Net asset exposure means the subsidiary has more assets than liabilities denominated in foreign currency - When foreign currency strengthens, the value of those net assets increases when converted to parent's currency - This positive adjustment is recorded in **other comprehensive income** (cumulative translation adjustment) **Why other options are incorrect:** - Option A: Net asset exposure + foreign currency weakening = negative adjustment - Option C: Net liability exposure + foreign currency strengthening = negative adjustment Option B is correct because net asset exposure with strengthening currency creates a positive translation adjustment.

Author: LeetQuiz Editorial Team