Question 1

Where profits generated by the foreign operation are retained in the foreign entity and used for its expansion:

Accepted Answer

A) the foreign operation's currency is likely to be the presentation currency. 
B) the foreign operation's currency is likely to be the functional currency. 
C) the reporting entity's currency is likely to be the functional currency. 
D) the reporting entity's currency is likely to be the presentation currency. 
A) the foreign operation's currency is likely to be the presentation currency. 
B) the foreign operation's currency is likely to be the functional currency. 
C) the reporting entity's currency is likely to be the functional currency. 
D) the reporting entity's currency is likely to be the presentation currency. B

Question 2

The currency of the country in which the foreign operation is based is referred to as the:

Accepted Answer

A) local currency. 
B) presentation currency. 
C) operational currency. 
D) functional currency. 
A) local currency. 
B) presentation currency. 
C) operational currency. 
D) functional currency. A

Question 3

Translating from the functional currency to the presentation currency involves which of the following procedures?

Accepted Answer

A) Recognise exchange differences in other comprehensive income. 
B) Translate the income and expenses at the exchange rates at the dates of the transactions. 
C) Translate the assets and liabilities at the closing rate at the date of the statement of financial position. 
D) All of the above. 
A) Recognise exchange differences in other comprehensive income. 
B) Translate the income and expenses at the exchange rates at the dates of the transactions. 
C) Translate the assets and liabilities at the closing rate at the date of the statement of financial position. 
D) All of the above. D

Question 4

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

Accepted Answer

A) translate all liabilities using the current rate existing at the end of the reporting period. 
B) first classify the liabilities into current or non-current. 
C) first classify the liabilities as monetary or non-monetary. 
D) translate all liabilities using the rate applicable when the original transaction was recorded. 
A) translate all liabilities using the current rate existing at the end of the reporting period. 
B) first classify the liabilities into current or non-current. 
C) first classify the liabilities as monetary or non-monetary. 
D) translate all liabilities using the rate applicable when the original transaction was recorded.

Question 5

Which exchange rate should be used when translating revenue and expense items in the statement of profit or loss and other comprehensive income into the functional currency?

Accepted Answer

A) Current as at the end of the financial year. 
B) Calculated as the average between the rates at the start and end of the year. 
C) Current at the dates the applicable transaction occurred. 
D) None of the above. 
A) Current as at the end of the financial year. 
B) Calculated as the average between the rates at the start and end of the year. 
C) Current at the dates the applicable transaction occurred. 
D) None of the above.

Question 6

The exchange rate at a point of time for immediate delivery of the currency in an exchange is known as the:

Accepted Answer

A) spot rate. 
B) point rate. 
C) immediate rate. 
D) temporal rate. 
A) spot rate. 
B) point rate. 
C) immediate rate. 
D) temporal rate.

Question 7

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

Accepted Answer

A) spot rate at end of reporting period. 
B) average rate for the reporting period. 
C) exchange rate when the historical cost was determined. 
D) exchange rate when the historical cost was revalued to fair value. 
A) spot rate at end of reporting period. 
B) average rate for the reporting period. 
C) exchange rate when the historical cost was determined. 
D) exchange rate when the historical cost was revalued to fair value.

Question 8

Exchange differences arising when translating from the functional currency into the presentation currency are recognised in other comprehensive income and:

Accepted Answer

A) recorded as a deferred asset and amortised over the expected useful life. 
B) recognised in profit or loss. 
C) accumulated in equity using a 'foreign currency translation reserve'. 
D) accumulated in equity using retained earnings. 
A) recorded as a deferred asset and amortised over the expected useful life. 
B) recognised in profit or loss. 
C) accumulated in equity using a 'foreign currency translation reserve'. 
D) accumulated in equity using retained earnings.

Question 9

Indicators pointing towards the reporting entity's currency as the functional currency include that which of the following?

Accepted Answer

A) There are active local markets,although there may be significant amounts of exports. 
B) Sales are mostly in the country of the reporting entity. 
C) Prices are not primarily responsive in the short term to exchange rate changes. 
D) Production costs and operating expenses are determined primarily by local conditions. 
A) There are active local markets,although there may be significant amounts of exports. 
B) Sales are mostly in the country of the reporting entity. 
C) Prices are not primarily responsive in the short term to exchange rate changes. 
D) Production costs and operating expenses are determined primarily by local conditions.

Question 10

The presentation currency is:

Accepted Answer

A) the currency of the primary economic environment in which the foreign entity operates. 
B) a currency other than the entity's functional currency . 
C) the currency of the country in which the foreign operation is based. 
D) the currency in which the financial statements are presented by the reporting entity. 
A) the currency of the primary economic environment in which the foreign entity operates. 
B) a currency other than the entity's functional currency . 
C) the currency of the country in which the foreign operation is based. 
D) the currency in which the financial statements are presented by the reporting entity.

Question 11

Assets and liabilities to be received or paid in a fixed or determinable number of units of money are referred to as:

Accepted Answer

A) monetary items. 
B) fixed items. 
C) non-monetary items. 
D) fixed units. 
A) monetary items. 
B) fixed items. 
C) non-monetary items. 
D) fixed units.

Question 12

According to the temporal method,monetary assets are translated at the:

Accepted Answer

A) average exchange rate for the reporting period. 
B) current rate existing at the end of the reporting period. 
C) exchange rate at the date the monetary assets were first recognised. 
D) exchange rate existing at the start of the reporting period. 
A) average exchange rate for the reporting period. 
B) current rate existing at the end of the reporting period. 
C) exchange rate at the date the monetary assets were first recognised. 
D) exchange rate existing at the start of the reporting period.

Question 13

If a reporting entity establishes a foreign operation,the equity used to form the foreign operation is the:

Accepted Answer

A) pre-acquisition equity. 
B) foreign equity. 
C) reporting equity. 
D) post-acquisition equity. 
A) pre-acquisition equity. 
B) foreign equity. 
C) reporting equity. 
D) post-acquisition equity.

Question 14

Aussie Ltd acquired 100% of Sing Sing Ltd (Sing Sing)on 1 July 20X0.The balance sheet of Sing Sing as at 30 June 20X1 was as follows.
Balance Sheet as at 30 June 20X1
 
$\bullet$Relevant exchange rates are as follows.
 
If the local currency of Sing Sing is Singapore dollars and the functional currency is Australian dollars,the total assets of S$1 800,000 would translate into Australian dollars as:

Accepted Answer

A) $1 565 217. 
B) $1 488 696. 
C) $1 440 000. 
D) $1 475 410. 
A) $1 565 217. 
B) $1 488 696. 
C) $1 440 000. 
D) $1 475 410.

Question 15

Dividends declared are translated into the presentation currency at the:

Accepted Answer

A) average exchange rate for the reporting period. 
B) rates current when the dividends are declared. 
C) rates current when the dividends are paid to the shareholders. 
D) rates current when the shareholders approve the dividend at the company's annual general meeting. 
A) average exchange rate for the reporting period. 
B) rates current when the dividends are declared. 
C) rates current when the dividends are paid to the shareholders. 
D) rates current when the shareholders approve the dividend at the company's annual general meeting.

Question 16

Which of the following must be disclosed when the presentation currency of the parent entity is different from the functional currency?

Accepted Answer

A) The reason for using a different presentation currency 
B) The fact they are different 
C) The functional currency 
D) All of the above 
A) The reason for using a different presentation currency 
B) The fact they are different 
C) The functional currency 
D) All of the above

Question 17

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

Accepted Answer

A) Motor vehicles 
B) Inventory 
C) Machinery 
D) Cash 
A) Motor vehicles 
B) Inventory 
C) Machinery 
D) Cash

Question 18

According to AASB 121 The Effects of Changes in Foreign Exchange Rates,the key economic factor to consider in determining an entity's functional currency is:

Accepted Answer

A) which economic environment has the higher exchange rate. 
B) in which economic environment does the company incur the highest proportion of its production costs. 
C) which economic environment an entity primarily generates and spends cash. 
D) none of the above. 
A) which economic environment has the higher exchange rate. 
B) in which economic environment does the company incur the highest proportion of its production costs. 
C) which economic environment an entity primarily generates and spends cash. 
D) none of the above.

Question 19

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

Accepted Answer

A) in profit or loss in the period in which they arise. 
B) directly in the retained earnings account. 
C) as a deferred asset or liability and amortised over a period of 10 years. 
D) as a separate component of equity. 
A) in profit or loss in the period in which they arise. 
B) directly in the retained earnings account. 
C) as a deferred asset or liability and amortised over a period of 10 years. 
D) as a separate component of equity.

Question 20

When translating from the functional currency into the presentation currency,exchange differences arise because of which of the following?

Accepted Answer

A) Opening net assets are translated at a closing rate different from the previous closing rate 
B) Income and expense items are translated at rates different from the closing rate used for all assets and liabilities 
C) Both a and b 
D) None of the above 
A) Opening net assets are translated at a closing rate different from the previous closing rate 
B) Income and expense items are translated at rates different from the closing rate used for all assets and liabilities 
C) Both a and b 
D) None of the above

Exam 17: Disclosure: Translation of Financial Statements Into a Presentation Currency

Where profits generated by the foreign operation are retained in the foreign entity and used for its expansion:

The currency of the country in which the foreign operation is based is referred to as the:

Translating from the functional currency to the presentation currency involves which of the following procedures?

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

Which exchange rate should be used when translating revenue and expense items in the statement of profit or loss and other comprehensive income into the functional currency?

The exchange rate at a point of time for immediate delivery of the currency in an exchange is known as the:

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

Exchange differences arising when translating from the functional currency into the presentation currency are recognised in other comprehensive income and:

Indicators pointing towards the reporting entity's currency as the functional currency include that which of the following?

The presentation currency is:

Assets and liabilities to be received or paid in a fixed or determinable number of units of money are referred to as:

According to the temporal method,monetary assets are translated at the:

If a reporting entity establishes a foreign operation,the equity used to form the foreign operation is the:

Dividends declared are translated into the presentation currency at the:

Which of the following must be disclosed when the presentation currency of the parent entity is different from the functional currency?

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

According to AASB 121 The Effects of Changes in Foreign Exchange Rates,the key economic factor to consider in determining an entity's functional currency is:

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

When translating from the functional currency into the presentation currency,exchange differences arise because of which of the following?

Nature and Regulation of Companies

Financing Company Operations

Company Operations

Fundamental Concepts of Corporate Governance

Fair Value Measurement

Accounting for Company Income Tax

Financial Instruments

Foreign Currency Transactions and Forward Exchange Contracts

Property, Plant and Equipment

Leases

Intangible Assets

Business Combinations

Impairment of Assets

Disclosure: Legal Requirements and Accounting Polices

Disclosure: Presentation of Financial Statements

Disclosure: Statement of Cash Flows

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Investments in Joint Arrangements

Insolvency and Liquidation

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