Deck 30: Foreign Currency Translation

Question 1

Which of these is NOT a requirement for an entity reporting in a currency of a hyperinflationary economy?

A)The financial statements should be stated in terms of a measuring unit current at the date of current statement of financial position date
B)Past corresponding financial statements should be stated in terms of a measuring unit which was current at the date of current statement of financial position date
C)Gain or loss on the net monetary position should be included in profit or loss and separately disclosed
D)The accounts should be completed in both the functional & presentation currencies.

Answer 1

D

Question 2

The financial statement of an entity operating in a hyperinflationary economy requires use of IAS 21 only.

Answer 2

False

Question 3

The presentation currency is the currency that the subsidiaries use to present their results to head office

Answer 3

False

Question 4

Which of these is NOT matched to the correct rate when using the temporal method?

A)Cost and depreciation of property,plant,equipment and intangible assets- date of acquisition
B)Exchange differences- closing rate
C)income and expense items- profit and loss
D)monetary items- closing rate

Question 5

Entity X is an Italian subsidiary of a Japanese company which trades exclusively with American companies.Which is their presentation currency?

A)Yen
B)Euro
C)Sterling
D)Dollar

Question 6

What is the difference between currency conversion and currency translation?

A)Currency translation takes place during the year,currency translation takes place in transactions completed by the year end.
B)Currency conversion takes place in transactions not completed before year end; Currency Translation takes place in transactions completed by year end
C)Currency conversion takes place in transactions completed before year end; Currency Translation takes place in transactions not completed by year end
D)Currency conversion takes place in transactions not completed by the year end,currency translation takes place during the year

Question 7

Which of the following is NOT a form of hedging?

A)bonds
B)swaps
C)options
D)forwards

Question 8

IAS 21 treats functional currency monetary and non-monetary items in the same way.

Question 9

IAS 21 Requires translation of assets and liabilities at closing rate

Question 10

An entity can hedge the exposure position of a foreign investment by raising loans in a foreign country denominated in the functional currency of the foreign operation