Explain the AASB 121 Requirements for the Translation of Financial

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The Answer is The second major way in which an entity can conduct foreign activities is by conducting foreign operations via a foreign division,branch,subsidiary,associate,joint venture or similar arrangement.In these situations,the foreign operation's functional currency will not be the Australian dollar.The problem is therefore how to incorporate the results and financial position of the foreign operation with those of the Australian reporting entity which,of course,will usually have the Australian dollar as its presentation currency.The financial statements of those foreign operations will therefore need to be translated from the foreign functional currency into the Australian presentation currency so they can then be consolidated for purposes of preparing the Australian economic entity's accounts.Determination is required of the exchange rates to be used in translating the individual income,expense,asset,liability and equity items from the foreign functional currency into the Australian presentation currency.In this regard,AASB 121 para.39 specifies the following: The results and financial position of an entity ...shall be translated into a different presentation currency using the following procedures: (a)assets and liabilities for each statement of financial position presented shall be translated at the closing rate at the date of that statement of financial position; (b)income and expenses for each statement of comprehensive income or separate income statement presented (i.e.including comparatives)shall be translated at exchange rates at the dates of the transactions; and (c)all resulting exchange differences shall be recognised in other comprehensive income.

Explain the AASB 121 Requirements for the Translation of Financial

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Explain the AASB 121 Requirements for the Translation of Financial

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Correct Answer:
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