Exam 36: Translation of the Accounts of Foreign Operations

Under the translation method required by AASB 121, the approach to translating a foreign operation's accounts includes:

As prescribed in AASB 121, translation of the accounts of foreign operations to the presentation currency requires any gains or losses on translation be taken directly to reserves:

In translating the accounts of a foreign operation from functional to presentation currency,resulting exchange differences is recognised in other comprehensive income.

In the process of consolidating the translated financial accounts of a foreign operation, the calculation of minority interests will be affected by the translation process in what way?

Ramikin Co is a fully owned subsidiary of Bobbin Ltd, an Australian company. Bobbin Ltd purchased all the issued capital of Ramikin Ltd on 1 July 2004. Ramikin Ltd is based in Canada. The following information is summarised from the foreign currency accounts of Ramikin Ltd for the period ended 30 June 2005. Additional information: All revenues and expenses were earned or incurred evenly throughout the year. Inventory was purchased evenly over the period, with the inventory on hand at the end of the period purchased over the quarter ending on 30 June and trade creditors were accrued evenly over the period. Exchange rate information: Based on the information provided. What is the gain (loss) on foreign currency translation for Ramikin Ltd for the period?

Aus Co Ltd has a foreign operation based in New Zealand. The following information was extracted from the foreign operation's accounts for the period ended 30 June 2005: Exchange rate information is: What is the amount at which each item will be translated (rounded to the nearest $A)?

Distributions from retained profits are translated at

Aus Co Ltd has a foreign operation based in Japan. The following information was extracted from the foreign operation's accounts for the period ended 30 June 2005: Exchange rate information is: What is the amount at which each item would be translated (rounded to the nearest $A)?

If the exchange rate for US dollars relative to Australian dollars goes from US$1 = $A2.10 to US$1 = $A2.20, the Australian dollar has strengthened.

As prescribed in AASB 121, in translating the accounts of a foreign operation from local currency to functional currency, the exchange rate to use for land is the exchange rate at the date of the transaction.

The translation approach required by AASB 121 in translating to presentation currency is similar to the "current rate" method required under the former AASB 1012:

The amount of a foreign operation's post-acquisition retained earnings as translated into Australian dollars will depend on the amount translated from the income statement:

AASB 121 specifies that post-acquisition movements in equity other than retained profits or accumulated losses are translated at

When consolidating financial statements of foreign operations, we use the same rate each year for goodwill, so that the amount recognised on consolidation will not fluctuate from year to year:

AASB 121 prescribes alternative methods for the translation of the accounts of foreign operations. It depends upon whether these operations are integrated or self-sustaining:

Under the former AASB 1012 there were two methods of translation of the accounts of foreign operations; the method being used being dependent upon the whether these operations are integrated or self-sustaining:

Exchange differences resulting from the translation of foreign operations to presentation currency are shown:

AASB 121 requires foreign currency transactions to be recorded on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the reporting date.

The exchange rate used for the translation of the payment of dividends is the spot rate at the date when the retained earnings or reserves, from which the dividends were drawn, were createD.

Rudd Ltd, an Australian entity purchased Lee Ltd and Kew Ltd on 1 July 2012. Both entities are considered foreign operations of Rudd Ltd based in Singapore. The following information was extracted from the foreign operation's accounts for the period ended 30 June 2015: Exchange rate information is: The translation from Singapore dollars to Australian dollars resulted to the following balances: Which of the following translation processes were applied to Lee Ltd and Kew Ltd, respectively, for the year ended 30 June 2015?