Translating The Financial Statements Of Foreign Operations

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Question 1
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As prescribed in IAS 21,in translating the financial statements of a foreign operation from functional to presentation currency,the exchange rate to use for inventory is the average rate during the period the inventory was purchased.

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Question 2
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As prescribed in IAS 21,in translating the accounts of a foreign operation from local currency to functional currency,the exchange rate to use for land is the exchange rate at the date of the transaction.

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Question 3
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IAS 21 prescribes alternative methods for the translation of the financial statements of foreign operations.It depends upon whether these operations are integrated or self-sustaining.

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Question 4
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Exchange differences arising from translation to the presentation currency are not recognised in profit or loss because the changes in exchange rates have little or no direct effect on the present and future cash flows from operations.

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Question 5
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As prescribed in IAS 21,translation of the financial statements of foreign operations to the presentation currency requires any gains or losses on translation be taken directly to reserves.

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Question 6
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The foreign exchange exposure of the parent entity in relation to its foreign operation relates to the net cash flows of the investment in the operation.

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Question 7
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The exchange rate used for the translation of the payment of dividends is the spot rate at the date when the retained earnings or reserves,from which the dividends were drawn,were created.

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Question 8
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When consolidating financial statements of foreign operations,we use the same rate each year for goodwill,so that the amount recognised on consolidation will not fluctuate from year to year.

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Question 9
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The amount of a foreign operation's post-acquisition retained earnings as translated into functional currency will depend on the amount translated from the statement of comprehensive income.

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Question 10
Multiple Choice

Exchange differences resulting from the translation of foreign operations to presentation currency are shown:

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A
in the 'retained earnings' section of equity.
B
in the 'general reserve' section of equity.
C
in the 'asset revaluation reserve' section of equity.
D
none of the given answers.
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Question 11
Multiple Choice

When translating the financial statements of a foreign operation to presentation currency,IAS 21 requires any gain or loss on translation of the financial statements to be:

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A
recognised as a revenue or expense in the statement of comprehensive income.
B
transferred to a reserve in the equity section of the statement of financial position.
C
deferred and amortised over a period not greater than 20 years.
D
written off against the non-monetary assets of the foreign operation with any balance remaining recognised as a revenue or expense in the period.
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Question 12
Multiple Choice

If the assets of a foreign operation exceed its liabilities,and the value of the functional currency (for example the Euro)falls relative to the currency of the foreign operations,there will be:

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A
a credit to the 'foreign currency translation reserve' in the consolidated financial statements.
B
a debit to the 'foreign currency translation reserve' in the consolidated financial statements.
C
a credit to 'foreign currency translation revenue' in the consolidated financial statements.
D
a debit to the 'foreign currency translation expense' in the consolidated financial statements.
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Question 13
Multiple Choice

IAS 21 specifies that post-acquisition movements in equity other than retained profits or accumulated losses are translated at:

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A
the spot rate.
B
the forward rate.
C
the market rate.
D
none of the given answers.
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Question 14
Multiple Choice

Distributions from retained profits are translated at:

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A
the spot rate.
B
the rates current at the reporting date.
C
the rates current at the dates when the retained profits were created.
D
The standard is silent on this translation.
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Question 15
Multiple Choice

Under the translation method required by IAS 21,the approach to translating a foreign operation's financial statements includes:

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A
translating post-acquisition changes in equity at the exchange rate current at the date of the change.
B
translating non-monetary assets at the spot exchange rate at the date of the purchase transaction.
C
translating revenue and expense items at the average rate for the period where the revenues and expense transactions have been evenly distributed over the period.
D
translating proposed distributions from retained profits at the exchange rate current when the distributions are completed in cash.
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Question 16
Multiple Choice

Under the translation method required by IAS 21,the approach to translating a foreign operation's financial statements includes:

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A
translating monetary items at the closing rate of exchange .
B
translating non-monetary assets at the average exchange rate since the date of purchase of the asset.
C
translating transfers of post-acquisition equity items within the equity category at the rate of exchange current at the date the original equity item was first included in equity.
D
translating revenues and expenses at the average rate of exchange applied to equity items.
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Question 17
Multiple Choice

Under the translation method required by IAS 21,the approach to translating a foreign operation's accounts includes:

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A
Non-monetary items included in the statement of financial position are translated at the rate current at reporting date.
B
Equity at the date of investment is translated at the rate for the when the investment was acquired.
C
Revenue and expense items are translated at the exchange rates current at the applicable transaction dates statement of financial position.
D
all of the given answers.
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Question 18
Multiple Choice

When translating foreign subsidiary financial statements,net assets are translated at the ---- rate and the components of net assets are translated at the -----rate.

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A
(a) current; (b) spot
B
(a) historical; (b) current
C
(a) current; (b) historical
D
(a) spot; (b) current
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Question 19
Multiple Choice

Aus Co Ltd has a foreign operation based in Japan.The following information was extracted from the foreign operation's financial statements for the period ended 30 June 2015: image Exchange rate information is: image What is the amount at which each item would be translated (rounded to the nearest A$)?

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A
image
B
image
C
image
D
image
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Question 20
Multiple Choice

Aus Co Ltd has a foreign operation based in New Zealand.The following information was extracted from the foreign operation's financial statements for the period ended 30 June 2015: image Exchange rate information is: image What is the amount at which each item will be translated (rounded to the nearest A$)?

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A
image
B
image
C
image
D
image
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