Exam 36: Translation of the Accounts of Foreign Operations

Yarra Manufacturing Ltd is an Australian registered entity that has a branch in Singapore, Kew Ltd. Kew Ltd has a foreign operation in China. The foreign operation maintains its accounting records in Chinese Yuan. The functional currency of the Chinese operation is Singapore dollar. The presentation currency of Kew Ltd is Australian dollar. At reporting date, the translation of the financial statements of the Chinese foreign operation resulted to a loss of S$6 500 and the translation of the financial statements of Kew Ltd to its presentation currency resulted to a gain of A$4 500. Which of the following results is consistent with AASB 121 with respect to Yarra Manufacturing Ltd?

The net assets of a foreign operation at 30 June 2005 are constituted as assets of US$400,000 and liabilities of US$250,000. The parent entity purchased the foreign subsidiary on 1 July 2002. Exchange rate information is as follows: The foreign operation has not traded during the year ended 30 June 2005, so the net assets remained unchanged during the period. What is the parent entity's foreign currency exposure for the year ended 30 June 2005?

On the disposal of a foreign operation, AASB 121 prescribed that the cumulative amount of the exchange differences deferred in equity be reclassified to retained earnings.

Yarra Manufacturing Ltd is an Australian registered entity that has a branch in Singapore, Kew Ltd. The Singapore branch has a foreign operation in China. The foreign operation maintains its accounting records in Chinese Yuan. The functional currency of the Chinese operation is Singapore dollar. The presentation currency of Kew Ltd is Australian dollar. At reporting date, the translation of the financial statements of the Chinese foreign operation resulted to a loss of S$6 500 and the translation of the financial statements of Kew Ltd to its presentation currency resulted to a gain of A$4 500. Which of the following results is consistent with AASB 121 with respect to Kew Ltd?

If the assets of a foreign operation exceed its liabilities, and the value of the Australian dollar falls relative to the currency of the foreign operations, there will be:

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

As prescribed in AASB 121, in translating the accounts of a foreign operation from functional to presentation currency, the exchange rate to use for inventory is the average rate during the period the inventory was purchased.

When translating the financial statements of a foreign operation to presentation currency, AASB 121 requires any gain or loss on translation of the accounts to be:

Exchange differences arising from translation to the presentation currency are not recognised in profit or loss because the changes in exchange rates have little or no direct effect on the present and future cash flows from operations:

The following is an extract from the 'Notes to the Accounts' explaining the foreign currency translation reserve. What are the rates represented by (a) and (b)?

As prescribed in AASB 121, when re-measuring financial statements of foreign operations to functional currency, which of the following identifies all items to be re-measured at historic rates?

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

In the process of consolidating the translated financial accounts of a foreign operation, what will be the form of the journal entry required to eliminate the foreign currency effect of a purchase of inventory by the subsidiary from the parent entity? Assume that the value of the foreign currency of the foreign operation has increased relative to the reporting currency.

In the process of consolidating the translated financial accounts of a foreign operation, the elimination entry to record goodwill will be affected by the translation process in what way?

Lennon Ltd has two foreign operations based in Japan. 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 Japanese Yen to Australian dollars resulted to the following balances (rounded to the nearest ¥000): Which of the following translation processes were applied to Yoko Ltd and Ono Ltd, respectively, for the year ended 30 June 2015?

Emu Co Ltd purchased a foreign operation based in Singapore on 1 July 2002. The following information was extracted from the foreign operation's accounts for the period ended 30 June 2004: Exchange rate information is: What is the amount at which each item will be translated (rounded to the nearest $A)?

The foreign exchange exposure of the parent entity in relation to its foreign operation relates to the net cash flows of the investment in the operation:

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

The 'spot rate' is:

On 1 July 2003 Land Ltd acquired all of the issued shares of Fall Co, a company based in the US. The financial statements for Fall Co for the year ended 30 June 2005 are provided below. Exchange rate information is: Additional information: All revenues and expenses were earned or incurred evenly throughout the year. All plant and equipment was purchased using a long-term loan when the exchange rate was $A1.00 = US$0.54. 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 accounts payable were accrued evenly over the period. What are the translated amounts for operating profit, retained profit at 30 June 2005, total equity and liabilities and the gain or loss on foreign currency translation for Fall Co (rounded to the nearest $A)?