Exam 24: Translation of Foreign Currency Financial Statements

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

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

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

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

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

Which of the following factors should be considered when determining the functional currency?

Which of the following is not an activity economic indicator for determining the functional currency?

Banjo Ltd acquired 100% of Wellington Ltd on 1 July 2021. The balance sheet of Wellington Ltd on that date was as follows: $\text { Balance sheet at } 1 \text { July } 2021$ NZ\& NZ \ Machinery at cost 560,000 Share capital 400,000 Investment property 400,000 General reserve 200,000 Receivables 100,000 Retained earnings 600,000 Cash 140,000 1,200,000 1,200,000 The balance sheet of Wellington Ltd as at 30 June 2022 is as follows: Balance sheet as at 30 June 2022 NZ\& NZ \ Machinery - carrying value 300,000 Share capital 400,000 Investment property 400,000 General Reserve 200,000 Receivables 500,000 Retained earnings 1,000,000 Cash 600,000 Accounts payable 170,000 Income tax payable 30,000 1,800,000 1,800,000 Relevant exchange rates are as follows: \&A \ 1 July 2021 1.00= 0.95 30 June 2022 1.00= 0.85 Average 2021-22 1.00= 0.90 If the local currency of Wellington Ltd is New Zealand dollars and the functional currency is Australian dollars the total assets of NZ$1,800,000 would translate into Australian dollars as:

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

Bondi Ltd has an investment in Christchurch Ltd. The shares in Christchurch were acquired on 15 April 2074. Christchurch uses the revaluation model to account for equipment. Equipment acquired by Christchurch on 1 May 2015 was revalued on 25 May 2022. The exchange rate used to translate the building into the presentation currency for the year ending 30 June 2022 is the rate that applied on:

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

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

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

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

According to AASB 121 The Effects of Changes in Foreign Exchange Rates, the currency of the primary economic environment in which the foreign entity operates is the:

Zephyr Limited has the following items in its statement of profit or loss and other comprehensive income: NZ$ Revenue 140 000 Cost of goods sold 85 000 Interest expense 14 000 Income tax expense 12 000 All items arose evenly across the year. The following exchange rates applied: End of reporting period       NZ$1.00 = A$0.90 Average rate for year          NZ$1.00 = A$0.85 The net profit after tax translated into the presentation currency of A$ is:

The financial statements of a foreign subsidiary with an Australian parent company must:

Monetary items are best described as:

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: