Exam 10: Translation of the Financial Statements of Foreign Entities

When translating the revenue and expenses in the statement of profit or loss and other comprehensive income, theoretically each item of revenue and expense should be translated using the spot exchange rate between the:

The general rule for translating liabilities denominated in a foreign currency into the functional currency is to:

If foreign currency denominated non-monetary items are measured using the fair value method, they must be translated into the functional currency using the:

When translating into the functional currency monetary liabilities are translated using the:

When translating foreign currency denominated financial statements into the functional currency, the exchange differences are recognised:

By applying the definition provided in AASB 121 The Effects of Changes in Foreign Exchange Rates, the following items will be regarded as a monetary item:

Under AASB 121 The Effects of Changes in Foreign Exchange Rates, an entity must disclose which of the following items in particular? I. The amount of exchange differences included in profit or loss of the period. II. The amount of the exchange difference included directly in share capital during the period. III. Whether a change in the functional currency has occurred. IV. The reason for using a presentation currency that is different from the functional currency.

The following information relates to questions Aussie Ltd acquired 100% of Sing Sing Ltd (Sing Sing) on 1 July 20X0. The balance sheet of Sing Sing on that date was as follows: $\text { Balance sheet at } 1 \text { July } 20X0$ S\& S \ Machinery at cost 280,000 Share capital 200,000 Investment property 200,000 General Reserve 100,000 Receivables 50,000 Retained earnings 300,000 Cash 70,000 600,000 600,000 The balance sheet of Sing Sing as at is as follows: Balance Sheet as at 30 June 20X1 S\& S \ Machinery- carrying value 150,000 Share capital 200,000 Investment property 200,000 General Reserve 100,000 Receivables 250,000 Retained earnings 500,000 Cash 300,000 Accounts payable 85,000 Income tax payable 15,000 900,000 900,000 Relevant exchange rates are as follows: A\&S \ 1 July 20X0 1.00= 1.25 30 June 20X1 1.00= 1.28 Average 20X0-X1 1.00= 1.18 -If the local currency of Sing Sing is Singapore dollars and the functional currency is Australian dollars the total assets of S$900,000 would translate into Australian dollars as:

The following information relates to questions Aussie Ltd acquired 100% of Sing Sing Ltd (Sing Sing) on 1 July 20X0. The balance sheet of Sing Sing on that date was as follows: $\text { Balance sheet at } 1 \text { July } 20X0$ S\& S \ Machinery at cost 280,000 Share capital 200,000 Investment property 200,000 General Reserve 100,000 Receivables 50,000 Retained earnings 300,000 Cash 70,000 600,000 600,000 The balance sheet of Sing Sing as at is as follows: Balance Sheet as at 30 June 20X1 S\& S \ Machinery- carrying value 150,000 Share capital 200,000 Investment property 200,000 General Reserve 100,000 Receivables 250,000 Retained earnings 500,000 Cash 300,000 Accounts payable 85,000 Income tax payable 15,000 900,000 900,000 Relevant exchange rates are as follows: A\&S \ 1 July 20X0 1.00= 1.25 30 June 20X1 1.00= 1.28 Average 20X0-X1 1.00= 1.18 -If the functional currency of Sing Sing is Singapore dollars and the presentation currency is Australian dollars the total assets of S$900 000 would translate into Australian dollars as:

Mortimer Limited has the following items in its statement of profit or loss and other comprehensive income: Revenue FC60 000, Cost of goods sold FC25 000, Interest expense FC8 000, Income tax expense FC10 000. All items arose evenly across the year. The following exchange rates applied: End of reporting period 1= \ 0.80 Average rate for year 1= \ 0.75 The net profit after tax translated into the presentation currency is:

According to AASB 121 The Effects of Changes in Foreign Exchange Rates, the currency in which an entity primarily generates and expends cash is considered to be the:

According to AASB 121 The Effects of Changes in Foreign Exchange Rates, the following statement, 'the currency that affects the economic wealth of the entity', provides a definition of?

When translating into the presentation currency the translation difference is recognised:

Monetary items are best described as:

Indicators pointing towards the local overseas currency as the functional currency include, that the: I. Parent's cash flows are directly affected on a current basis. II. Cash flows are primarily in the local currency and do not affect the parent's cash flows. III. Sales prices are primarily responsive to exchange rate changes in the short-term. IV. Production costs are determined primarily by local conditions.

Aussie Ltd has an investment in Yankee Inc. The shares in Yankee were acquired on 15 August 20X4. Yankee uses the revaluation model to account for land & buildings. A building which was acquired by Yankee on 1 April 20X2 was revalued on 15 March 20X9. The exchange rate used to translate the building into the presentation currency at 30 June 20X9 is the rate that applied on:

Differences arise in relation to the treatment of which of the following when translating from the local to functional currency as opposed to the functional to presentation currency?

When translating into the functional currency foreign currency denominated non-monetary items measured using historical cost must be translated using the:

Post acquisition date retained earnings that are denominated in a foreign currency are: