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 2014.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 2015. Ramikin Ltd Statement of comprehensive income period ended 30 June 2015 $\begin{array}{|l|r|r|} \hline & \text { SCAN } & \text { SCAN } \\ \hline \text { Sales } & 5000 & \\ \hline \text { less Cost of goods sold } & & \\ \hline \text { Opening inventory } & 300 & \\ \hline \text { Purchases } & 2150 & \\ \hline \text { Closing inventory } & \underline{(400)} & \underline{2050} \\ \hline \text { Gross profit } & & 2950 \\ \hline \text { Expenses } & & \underline{1200} \\ \hline \text { Operating profit } & & 1750 \\ \hline \text { Income tax expense } & & \underline{980} \\ \hline \text { Operating profit after tax } & & \underline{770} \\ \hline \end{array}$ Ramikin Ltd Statement of financial position as at 30 June 2015 $\begin{array}{|l|r|r|} \hline \text { Assets } \\ \hline \text { Plant and equipment } & & 7450 \\ \hline \text { Land } & & 4000 \\ \hline \text { Cash and debtors } & & 830 \\ \hline \text { Inventory } & & \underline{400} \\ \hline \text { Total assets } & & \underline{12680} \\ \hline \text { Liabilities } & & \\ \hline \text { Bank loan } & & 4000 \\ \hline \text { Trade creditors } & & 610 \\ \hline \text { Shareholders' funds } & & \\ \hline \text { Share capital } & & 5300 \\ \hline \text { Retained eamings } & & \\ \hline \text { 31 July } 2014 & 2000 & \\ \hline \text { 30 June 2015 } & 770 & \underline{2770} \\ \hline \text { Totane liabilities and shareholders' funds } &&12680\\ \hline \end{array}$ 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: \[\begin{array} { | l | l | } \hline \text { July } 2014 & \text { \$CAN1.00 } = \text { A\$1.23 } \\ \hline 1 \text { July } 2014 & \text { \$CAN1.00 } = \text { A\$1.150 } \\ \hline \text { Average for the year ended } 30 \text { June } 2015 & \text { SCAN1.00 } = \text { A\$1.140 } \\ \hline \text { Average rate for quarter ending } 30 \text { June } 2015 & \text { \$CAN1.00 } = \text { A\$1.210 } \\ \hline \end{array}\] Based on the information provided.What is the gain/(loss)on foreign currency translation for Ramikin Ltd for the period?

A) gain A$385 B) loss A$28 C) loss A$612 D) gain A$376 A) gain A$385 B) loss A$28 C) loss A$612 D) gain A$376

Emu Co Ltd purchased a foreign operation based in Singapore on 1 July 2012.The following information was extracted from the foreign operation's accounts for the period ended 30 June 2014: \[\begin{array} { | l | r | } \hline &{ \text { \$S } } \\ \hline \text { Equipment (purchased 1 July 2012, revalued 1 June 2014) } & 650000 \\ \hline \text { Debentures (issued 1 June 2014) } & 900000 \\ \hline \text { Inventory on hand (purchased last quarter 2015) } & 68000 \\ \hline \text { Depreciation expense-equipment } & 54000 \\ \hline \text { Share capital at acquisition of foreign subsidiary } & 4000000 \\ \hline \text { Sales revenue (earned evenly over the period) } & 850000 \\ \hline \end{array}\] Exchange rate information is: \[\begin{array} { | l | l | } \hline \text { July } 2012 & \$ S 1.00 = A \$ 1.0520 \\ \hline \text { Average for year ended } 30 \text { June } 2014 & \$ S 1.00 = A \$ 1.0700 \\ \hline 1 \text { June } 2014 & \$ S 1.00 = A \$ 1.0735 \\ \hline \text { Last quarter } 2014 & \$ S 1.00 = A \$ 1.0600 \\ \hline 30 \text { June } 2014 & \$ S 1.00 = A \$ 1.0690 \\ \hline \end{array}\] What is the amount at which each item will be translated (rounded to the nearest A$)?

A) \[\begin{array} { | l | r | } \hline & { \text { A\$ } } \\ \hline \text { Equipment } & 697775 \\ \hline \text { Debentures } & 962100 \\ \hline \text { Inventory on hand } & 72080 \\ \hline \text { Depreciation expense-equipment } & 57969 \\ \hline \text { Share capital at acquisition of foreign subsidiary } & 4208000 \\ \hline \text { Sales revenue } & 909500 \\ \hline \end{array}\] B) \[\begin{array} { | l | r | } \hline & { \text { A\$ } } \\ \hline \text { Equipment } & 694850 \\ \hline \text { Debentures } & 962100 \\ \hline \text { Inventory on hand } & 72692 \\ \hline \text { Depreciation expense-equipment } & 57780 \\ \hline \text { Share capital at acquisition of foreign subsidiary } & 4208000 \\ \hline \text { Sales revenue } & 909500 \\ \hline \end{array}\] C) \[\begin{array} { | l | r | } \hline & { \mathrm { A\$ } } \\ \hline \text { Equipment } & 683800 \\ \hline \text { Debentures } & 966150 \\ \hline \text { Inventory on hand } & 72080 \\ \hline \text { Depreciation expense-equipment } & 56808 \\ \hline \text { Share capital at acquisition of foreign subsidiary } & 4276000 \\ \hline \text { Sales revenue } & 908650 \\ \hline \end{array}\] D) \[\begin{array} { | l | r | } \hline & { \text { A\$ } } \\ \hline \text { Equipment } & 695500 \\ \hline \text { Debentures } & 963000 \\ \hline \text { Inventory on hand } & 72760 \\ \hline \text { Depreciation expense-equipment } & 57780 \\ \hline \text { Share capital at acquisition of foreign subsidiary } & 4294000 \\ \hline \text { Sales revenue } & 908650 \\ \hline \end{array}\] A) \[\begin{array} { | l | r | } \hline & { \text { A\$ } } \\ \hline \text { Equipment } & 697775 \\ \hline \text { Debentures } & 962100 \\ \hline \text { Inventory on hand } & 72080 \\ \hline \text { Depreciation expense-equipment } & 57969 \\ \hline \text { Share capital at acquisition of foreign subsidiary } & 4208000 \\ \hline \text { Sales revenue } & 909500 \\ \hline \end{array}\] B) \[\begin{array} { | l | r | } \hline & { \text { A\$ } } \\ \hline \text { Equipment } & 694850 \\ \hline \text { Debentures } & 962100 \\ \hline \text { Inventory on hand } & 72692 \\ \hline \text { Depreciation expense-equipment } & 57780 \\ \hline \text { Share capital at acquisition of foreign subsidiary } & 4208000 \\ \hline \text { Sales revenue } & 909500 \\ \hline \end{array}\] C) \[\begin{array} { | l | r | } \hline & { \mathrm { A\$ } } \\ \hline \text { Equipment } & 683800 \\ \hline \text { Debentures } & 966150 \\ \hline \text { Inventory on hand } & 72080 \\ \hline \text { Depreciation expense-equipment } & 56808 \\ \hline \text { Share capital at acquisition of foreign subsidiary } & 4276000 \\ \hline \text { Sales revenue } & 908650 \\ \hline \end{array}\] D) \[\begin{array} { | l | r | } \hline & { \text { A\$ } } \\ \hline \text { Equipment } & 695500 \\ \hline \text { Debentures } & 963000 \\ \hline \text { Inventory on hand } & 72760 \\ \hline \text { Depreciation expense-equipment } & 57780 \\ \hline \text { Share capital at acquisition of foreign subsidiary } & 4294000 \\ \hline \text { Sales revenue } & 908650 \\ \hline \end{array}\]

Exam 33: Translating the Financial Statements of Foreign Operations

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.

(True/False)

(Multiple Choice)

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(38)

Question 51

Emu Co Ltd purchased a foreign operation based in Singapore on 1 July 2012.The following information was extracted from the foreign operation's accounts for the period ended 30 June 2014: \S Equipment (purchased 1 July 2012, revalued 1 June 2014) 650000 Debentures (issued 1 June 2014) 900000 Inventory on hand (purchased last quarter 2015) 68000 Depreciation expense-equipment 54000 Share capital at acquisition of foreign subsidiary 4000000 Sales revenue (earned evenly over the period) 850000 Exchange rate information is: July 2012 \ S1.00=A\ 1.0520 Average for year ended 30 June 2014 \ S1.00=A\ 1.0700 1 June 2014 \ S1.00=A\ 1.0735 Last quarter 2014 \ S1.00=A\ 1.0600 30 June 2014 \ S1.00=A\ 1.0690 What is the amount at which each item will be translated (rounded to the nearest A$)?

(Multiple Choice)

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(35)

Question 52

Exam 33: Translating the Financial Statements of Foreign Operations

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 primary economic environment in which an entity operates is normally the one in which it primarily generates and expends cash.

Outline the approach to be taken when translating the accounts of a foreign subsidiary; that is,the various rates to be used for the various components of the financial statements.

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.

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?

Distinguish monetary items from non-monetary items.Provide two examples of each.

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?

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.

A currency other than the functional currency of the entity is known as foreign currency.

Distributions from retained profits are translated at:

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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