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 2015: \[\begin{array} { | l | r |} \hline & \text { \$NZ 000 } \\ \hline \text { Machinery (purchased 1 July 2013, revalued 1 June 2015) } & 13000 \\ \hline \text { Inventory on hand (purchased last quarter 2015) } & 9800 \\ \hline \text { Depreciation expense-machinery } & 700 \\ \hline \text { Land (purchased 1 July 2013) } & 75000 \\ \hline \end{array}\] Exchange rate information is: \[\begin{array} { | l | l | } \hline \text { July } 2013 & \text { A\$1.00 } = \text { \$NZ 1.1255 } \\ \hline \text { Average for year ended } 30 \text { June } 2015 & \text { A\$1.00 } = \text { \$NZ 1.2135 } \\ \hline 1 \text { June } 2015 & \text { A\$1.00 } = \text { \$NZ 1.1024 } \\ \hline \text { Last quarter } 2015 & \text { A\$1.00 } = \text { \$NZ 1.2503 } \\ \hline 30 \text { June } 2015 & \text { A\$1.00 = \$NZ 1.3250 } \\ \hline \end{array}\] What is the amount at which each item will be translated (rounded to the nearest A$)?

A) \[\begin{array} { | l | r | } \hline & { \text { A\$ } } \\ \hline \text { Machinery } & 17225000 \\ \hline \text { Inventory on hand } & 1298500 \\ \hline \text { Depreciation expense-machinery } & 849450 \\ \hline \text { Land } & 99375000\\ \hline \end{array}\] B) \[\begin{array} { | l | r | } \hline & { \text { A\$ } } \\ \hline \text { Machinery } & 9811321 \\ \hline \text { Inventory on hand } & 9396226 \\ \hline \text { Depreciation expense-machinery } & 576844 \\ \hline \text { Land } & 56603774 \\ \hline \end{array}\] C) \[\begin{array} { | l | r | } \hline & { \text { A\$ } } \\ \hline \text { Machinery } & 14331200 \\ \hline \text { Inventory on hand } & 12252940 \\ \hline \text { Depreciation expense-machinery } & 771680 \\ \hline \text { Land } & 84412500 \\ \hline \end{array}\] D) \[\begin{array} { | l | r | } \hline & { \text { A\$ } } \\ \hline \text { Machinery } & 11792453 \\ \hline \text { Inventory on hand } & 7838119 \\ \hline \text { Depreciation expense-machinery } & 634978 \\ \hline \text { Land } & 66637050 \\ \hline \end{array}\] A) \[\begin{array} { | l | r | } \hline & { \text { A\$ } } \\ \hline \text { Machinery } & 17225000 \\ \hline \text { Inventory on hand } & 1298500 \\ \hline \text { Depreciation expense-machinery } & 849450 \\ \hline \text { Land } & 99375000\\ \hline \end{array}\] B) \[\begin{array} { | l | r | } \hline & { \text { A\$ } } \\ \hline \text { Machinery } & 9811321 \\ \hline \text { Inventory on hand } & 9396226 \\ \hline \text { Depreciation expense-machinery } & 576844 \\ \hline \text { Land } & 56603774 \\ \hline \end{array}\] C) \[\begin{array} { | l | r | } \hline & { \text { A\$ } } \\ \hline \text { Machinery } & 14331200 \\ \hline \text { Inventory on hand } & 12252940 \\ \hline \text { Depreciation expense-machinery } & 771680 \\ \hline \text { Land } & 84412500 \\ \hline \end{array}\] D) \[\begin{array} { | l | r | } \hline & { \text { A\$ } } \\ \hline \text { Machinery } & 11792453 \\ \hline \text { Inventory on hand } & 7838119 \\ \hline \text { Depreciation expense-machinery } & 634978 \\ \hline \text { Land } & 66637050 \\ \hline \end{array}\]

A) the rate for delivery the next day of currencies to be exchanged. B) the exchange rate for immediate delivery of currencies to be exchanged. C) only used in relation to metals, that is, the spot metal price. D) can never be used in translating the accounts of foreign operations. A) the rate for delivery the next day of currencies to be exchanged. B) the exchange rate for immediate delivery of currencies to be exchanged. C) only used in relation to metals, that is, the spot metal price. D) can never be used in translating the accounts of foreign operations.

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: \[\begin{array} { | l | r | r | } \hline \text { In Singapore \$ } & \text { Lee Ltd } & \text { Kew Ltd } \\ \hline \text { Equipment (purchased 1 July 2012, revalued 1 June 2014) } & 650000 & 200000 \\ \hline \text { Debentures (issued 1 June 2014) } & 900000 & 500000 \\ \hline \text { Inventory—asset (purchased last quarter 2015) } & 68000 & 50000 \\ \hline \text { Depreciation expense-equipment } & 54000 & 25000 \\ \hline \text { Share capital at acquisition of foreign operation } & 4000000 & 2000000 \\ \hline \text { Sales revenue (earned evenly over the period) } & 850000 & 680000 \\ \hline \end{array}\] Exchange rate information is: \[\begin{array} { | l | l |} \hline 1 \text { July } 2012 & \$ S 1.00 = A \$ 1.0520 \\ \hline \text { Average for year ended } 30 \text { June } 2015 & \$ S 1.00 = A \$ 1.0700 \\ \hline 1 \text { June } 2014 & \$ S 1.00 = A \$ 1.0735 \\ \hline \text { Second quarter } 2015 & \$ S 1.00 = A \$ 1.0600 \\ \hline 30 \text { June } 2015 & \$ S 1.00 = A \$ 1.0690 \\ \hline \end{array}\] The translation from Singapore dollars to Australian dollars resulted to the following balances: \[\begin{array} { | l | r | r | } \hline \text { In Singapore \$ } & \text { Lee Ltd } & \text { Kew Ltd } \\ \hline \text { Equipment (purchased 1 July 2012, revalued 1 June 2014) } & 694850 & 214700 \\ \hline \text { Debentures (issued 1 June 2014) } & 962100 & 962100 \\ \hline \text { Inventory on hand(second quarter 2015) } & 72692 & 53000 \\ \hline \text { Depreciation expense-equipment } & 57780 & 26838 \\ \hline \text { Share capital at acquisition of foreign subsidiary } & 4208000 & 2104000 \\ \hline \text { Sales revenue (earned evenly over the period) } & 909500 & 727600 \\ \hline \end{array}\] Which of the following translation processes were applied to Lee Ltd and Kew Ltd,respectively,for the year ended 30 June 2015?

A) functional currency; presentation currency B) functional currency; functional currency C) presentation currency; functional currency D) presentation currency; presentation currency A) functional currency; presentation currency B) functional currency; functional currency C) presentation currency; functional currency D) presentation currency; presentation currency

The net assets of a foreign operation at 30 June 2015 are constituted as assets of US$400 000 and liabilities of US$250 000.The parent entity purchased the foreign subsidiary on 1 July 2012.Exchange rate information is as follows: \[\begin{array} { | l | l | } \hline 1 \text { July } 2012 & \text { US\$1.00 = A\$1.6949 } \\ \hline 1 \text { July } 2014 & \text { US\$1.00 = A\$1.7857 } \\ \hline 30 \text { June } 2015 & \text { US\$1.00 = A\$1.9231 } \\ \hline \end{array}\] The foreign operation has not traded during the year ended 30 June 2015,so the net assets remained unchanged during the period.What is the parent entity's foreign currency exposure for the year ended 30 June 2015?

A) foreign exchange gain A$197 185 B) foreign exchange gain A$20 610 C) foreign exchange gain A$342 310 D) foreign exchange loss A$6002 This means the opening currency is 1.7857; closing currency is 1.9231 = movement of US$ 0.1374. Therefore the net assets of US$150,000 (400-200) x 0.1374 = $20,610. This is a gain as the US$ has strengthened against the A$. A) foreign exchange gain A$197 185 B) foreign exchange gain A$20 610 C) foreign exchange gain A$342 310 D) foreign exchange loss A$6002 This means the opening currency is 1.7857; closing currency is 1.9231 = movement of US$ 0.1374. Therefore the net assets of US$150,000 (400-200) x 0.1374 = $20,610. This is a gain as the US$ has strengthened against the A$.

Exam 33: Translating the Financial Statements of Foreign Operations

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 2015: \NZ 000 Machinery (purchased 1 July 2013, revalued 1 June 2015) 13000 Inventory on hand (purchased last quarter 2015) 9800 Depreciation expense-machinery 700 Land (purchased 1 July 2013) 75000 Exchange rate information is: July 2013 A \1 .00 = \NZ 1.1255 Average for year ended 30 June 2015 A \1 .00 = \NZ 1.2135 1 June 2015 A \1 .00 = \NZ 1.1024 Last quarter 2015 A \1 .00 = \NZ 1.2503 30 June 2015 A \1 .00 = \NZ 1.3250 What is the amount at which each item will be translated (rounded to the nearest A$)?

(Multiple Choice)

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Question 21

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.

(True/False)

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Question 22

When a parent entity has an overseas subsidiary the first task before consolidation is to:

(Multiple Choice)

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Question 23

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.

(True/False)

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Question 24

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.

(True/False)

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Question 25

The 'spot rate' is:

(Multiple Choice)

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Question 26

When translating foreign subsidiary financial statements,net assets are translated at the ---- rate and the components of net assets are translated at the -----rate.

(Multiple Choice)

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Question 27

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

(Multiple Choice)

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Question 28

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: In Singapore \ Lee Ltd Kew Ltd Equipment (purchased 1 July 2012, revalued 1 June 2014) 650000 200000 Debentures (issued 1 June 2014) 900000 500000 Inventory—asset (purchased last quarter 2015) 68000 50000 Depreciation expense-equipment 54000 25000 Share capital at acquisition of foreign operation 4000000 2000000 Sales revenue (earned evenly over the period) 850000 680000 Exchange rate information is: 1 July 2012 \ S1.00=A\ 1.0520 Average for year ended 30 June 2015 \ S1.00=A\ 1.0700 1 June 2014 \ S1.00=A\ 1.0735 Second quarter 2015 \ S1.00=A\ 1.0600 30 June 2015 \ S1.00=A\ 1.0690 The translation from Singapore dollars to Australian dollars resulted to the following balances: In Singapore \ Lee Ltd Kew Ltd Equipment (purchased 1 July 2012, revalued 1 June 2014) 694850 214700 Debentures (issued 1 June 2014) 962100 962100 Inventory on hand(second quarter 2015) 72692 53000 Depreciation expense-equipment 57780 26838 Share capital at acquisition of foreign subsidiary 4208000 2104000 Sales revenue (earned evenly over the period) 909500 727600 Which of the following translation processes were applied to Lee Ltd and Kew Ltd,respectively,for the year ended 30 June 2015?

(Multiple Choice)

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Question 29

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

(True/False)

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Question 30

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

(Multiple Choice)

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Question 31

The net assets of a foreign operation at 30 June 2015 are constituted as assets of US$400 000 and liabilities of US$250 000.The parent entity purchased the foreign subsidiary on 1 July 2012.Exchange rate information is as follows: 1 July 2012 US \1 .00 = A \1 .6949 1 July 2014 US \1 .00 = A \1 .7857 30 June 2015 US \1 .00 = A \1 .9231 The foreign operation has not traded during the year ended 30 June 2015,so the net assets remained unchanged during the period.What is the parent entity's foreign currency exposure for the year ended 30 June 2015?

(Multiple Choice)

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Question 32

Explain how foreign currency translation reserves arise.When and how are these derecognised?

(Essay)

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Question 33

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.

(True/False)

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Question 34

If the exchange rate for US dollars relative to Australian dollars goes from US$1 = A$2.10 to US$1 = A$2.20,the Australian dollar has strengthened.

(True/False)

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Question 35

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.

(True/False)

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Question 36

On 1 July 2013 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 2015 are provided below.Exchange rate information is: 1 July 2013 A \1 .00 = US \0 .50 30 June 2014 A \1 .00 = US \0 .55 1 June 2015 A \1 .00 = US \0 .49 30 June 2015 A \1 .00 = US \0 .52 Average for the year ended 30 June 2015 A \1 .00 = US \0 .51 Dividends paid-1 March 2015 A \1 .00 = US \0 .53 Average rate for quarter ending 30 June 2015 A \1 .00 = US \0 .48 $On 1 July 2013 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 2015 are provided below.Exchange rate information is: \begin{array} { | l | r | } \hline 1 \text { July } 2013 & \text { A\$1.00 } = \text { US\$0.50 } \\ \hline 30 \text { June } 2014 & \text { A\$1.00 } = \text { US\$0.55 } \\ \hline 1 \text { June } 2015 & \text { A\$1.00 } = \text { US\$0.49 } \\ \hline 30 \text { June } 2015 & \text { A\$1.00 } = \text { US\$0.52 } \\ \hline \text { Average for the year ended } 30 \text { June } 2015 & \text { A\$1.00 } = \text { US\$0.51 } \\ \hline \text { Dividends paid-1 March } 2015 & \text { A\$1.00 } = \text { US\$0.53 } \\ \hline \text { Average rate for quarter ending } 30 \text { June } 2015 & \text { A\$1.00 } = \text { US\$0.48 } \\ \hline \end{array} 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 A$1.00 = US$0.54. Inventory was purchased evenly over the period,with the inventory on hand at the end of the period purchased over the quarter ending on 30 June,and accounts payable were accrued evenly over the period. What are the translated amounts for operating profit,retained profit at 30 June 2015,total equity and liabilities and the gain or loss on foreign currency translation for Fall Co (rounded to the nearest A$)?$ 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 A$1.00 = US$0.54. Inventory was purchased evenly over the period,with the inventory on hand at the end of the period purchased over the quarter ending on 30 June,and accounts payable were accrued evenly over the period. What are the translated amounts for operating profit,retained profit at 30 June 2015,total equity and liabilities and the gain or loss on foreign currency translation for Fall Co (rounded to the nearest A$)?

(Multiple Choice)

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Question 37

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 in a loss of S$6500 and the translation of the financial statements of Kew Ltd to its presentation currency resulted to a gain of A$4500. Which of the following results is consistent with AASB 121 with respect to Kew Ltd?

(Multiple Choice)

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Question 38

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

(True/False)

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Question 39

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.

(True/False)

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Question 40

Showing 21 - 40 of 52

Exam 33: Translating the Financial Statements of Foreign Operations

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.

When a parent entity has an overseas subsidiary the first task before consolidation is to:

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.

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.

The 'spot rate' is:

When translating foreign subsidiary financial statements,net assets are translated at the ---- rate and the components of net assets are translated at the -----rate.

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

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

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

Explain how foreign currency translation reserves arise.When and how are these derecognised?

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.

If the exchange rate for US dollars relative to Australian dollars goes from US$1 = A$2.10 to US$1 = A$2.20,the Australian dollar has strengthened.

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.

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

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.

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Accounting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Leases

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Share-Based Payments

Accounting for Income Taxes

The Statement of Cash Flows

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Related Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Accounting for Foreign Currency Transactions

Accounting for Corporate Social Responsibility

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