Exam 24: Foreign Currency Translation

AASB 121 requires the translation of financial statements in which of the following circumstances? I.if the domestic currency of the foreign operation is not the same as the functional currency of its parent ii) if the functional currency of the foreign operation is not the same as the functional currency of its parent iii) if the functional durrency of the econornicentity is not its presentationcurrency iv) if the presentationarrency of the econornicentity is not its functional currency

In relation to cash flow hedges,AASB 7 requires that an entity must disclose separately which of the following?

Which of the following methods have been suggested for translating foreign currency financial statements:

Explain,using simple numerical example(s),how hedging a foreign currency transaction can remove uncertainty about the outcome of the transaction.

Explain,using simple numerical examples,the hedging of currency risk.

The 'spot' rate of exchange for foreign currencies is:

Once an entity has designated the hedging relationship and it qualifies for hedge accounting,it is classified as which one of three types of relationships:

Maypole Pty Ltd is an Australian company which has a functional currency of Australian dollars.Appleflower Pty Ltd is a US company which is a wholly owned subsidiary of Maypole.Its functional currency is US dollars.To comply with AASB 121,Maypole must translate the financial statements of Appleflower into Australian dollars to report in the consolidated groups financial statements. Appleflower has land which it acquired on 17 October 20X0 for US$ 500 000.The relevant exchange rates are as follows: Spot rate at date of acquisition AUS 1= US \ 0.80 Spot rate at 30 june 20\times1 AUS 1= US \ 0.85 Average rate for the 20\times1 financialyear AUS 1= US\ 0.82 The amount which should be recorded in the Maypole consolidated group for the land for the 20X1 financial year (assuming no fair value adjustments have occurred).is:

The 'forward' rate of exchange for foreign currencies is:

AASB 121 requires an entity to measure its financial performance and financial position in its functional currency.What are the indicators of a functional currency? Is the functional currency the same as the presentation currency? Explain your answers.

Exchange rates between the Australian dollar and the US dollar are determined by:

When translating the assets and liabilities from functional currency to presentation currency,AASB 121 requires that:

Which of the following represents three criteria of which all must be met by a hedging relationship for it to qualify for hedge accounting?

A transaction that is denominated on or requires settlement in a foreign currency is:

There are four methods suggested for translating foreign currency financial statements.Identify these four methods and explain the translation methods used under each.

Respectively,a company's domestic currency,functional currency and presentation currency are: I.the currency in which the financial statements must be presented ii) the currency in whichan entity is required to measureits financial performance and position iii) the currency of the country of incorporation iv) the currency of the country in which the majority of shareholders are located

A way in which a foreign currency transaction can be hedged is:

At the end of subsequent reporting periods,paragraph 23 requires that non-monetary items:

From paragraph 9,indicators of an entity's functional currency include which of the following:

The main objective of translating the financial statements of foreign operations into Australian dollars is to: