Ivanhoe Energy, a Canadian company, incurs net foreign exchange adjustments in 2010.
The U.S. dollar is the functional currency. In 2010, the Canadian dollar continued to strengthen relative to the U.S. dollar. Ivanhoe Energy raised $150 million in Canadian dollars in a private placement in the first quarter of 2010. In addition, Ivanhoe has $40 million in debt maintained in Canadian dollars. While the company uses Canadian GAAP, it provides an income statement using U.S. GAAP. The following partial income statement using U.S. GAAP is available:

Required:
A. Which method does Ivanhoe use to translate the financial statements? Explain your answer.
B. Explain how the change in the exchange rate is consistent with numbers reported on the incomestatement.

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Income Statement (U.S. GAAP) 2010 Revenue Oil Gain (loss) on derivative 2009 $21,720 15,017 36,945 $24,968 (7,841) 17,152 instruments Interest 208 Total Revenue Expenses Operating General and administrative Business and technology 9,503 26,260 10,191 21,693 development Depletion and depreciation Foreign exchange Interest and financing Impairment of intangible assets 10,615 5,103 (3,290) 24 9,651 9,294 5,066 856 Total Expenses 48,215 57,674 Loss from continuing operations $(11,270) (40,522)