6.07- Foreign Operations under IFRS

Question 1

What are the three ways to report foreign currency in IFRS?

Answer 1

• Foreign currency
• Functional currency
• Presentation currency

Question 2

What is foreign currency?

Answer 2

the currency of a particular county, usually what books and records are kept in

Question 3

What is functional currency?

Answer 3

currency in which the company generates and expends cash

Question 4

What is presentation currency?

Answer 4

currency in which the company prepares its financial statements

Question 5

If you have to go from foreign currency to function currency what is it called?

Answer 5

remeasurement and it goes on the income statement

Question 6

What is it called when you go form functional currency to presentation currency?

Answer 6

translation and it goes on the balance sheet

Question 7

In most foreign currency transactions the presentation currency is also which type of currency?

Answer 7

the functional

Question 8

Which currency is currently associated with the economy where the company mostly operates?

Answer 8

the functional

Question 9

What currency will the transaction be initially recorded at using the spot exchange rate at the date of transaction?

Answer 9

the functional

Question 10

At the balance sheet date, what 3 items that are measured in a foreign currency will be translated into the functional currency?

Answer 10

• monetary items
• non monetary items reported at historical cost
• non monetary items reported at fv

Question 11

Where are differences resulting form changes in monetary items recognized?

Answer 11

in income

Question 12

where are differences resulting from nonmonetary items recognized? 2 ways

Answer 12

• in OCI if gains/losses on exchanges would be recognized in OCI
• in profit/loss in gains/losses would be recognized in profit or loss

Question 13

What is the first thing that a company does when they are preparing financial statements that include foreign operations?

Answer 13

info is translated into the functional currency if it is not the same as the currency in which the books/records are kept at

Question 14

If the functional currency is the same as the presentation currency what can we do the information?

Answer 14

include it in the consolidated financial statements

Question 15

If the functional currency is not the same as the presentation currency, then after it is translated how do you account for financial items? 3 ways

Answer 15

• assets and liabilities are translated at rate on BS
• income/expeses are translated at rates that were in effect at the dates of the transactions
• differences are recognized in OCI