A US parent company has a subsidiary in the UK. The subsidiary's functional currency is the British Pound (GBP). The GBP strengthens against the US Dollar during the year. How will this affect the Translation Adjustment in Other Comprehensive Income (OCI)?

Under the Current Rate Method (used when Functional Currency is the local currency), all assets and liabilities are translated at the current spot rate. If the foreign currency strengthens, the US dollar value of the subsidiary's net investment increases. This increase is recorded as a positive Cumulative Translation Adjustment (CTA) in OCI.