F2 - 12. Group Accounts - Foreign Exchange Transactions

Question 1

What is functional currency?

Answer 1

The currency of the primary economic environment of an entity, set by fact

Question 2

How is the functional currency of a foreign sub considered?

Answer 2

1. Are the activities an extension of the reporting entity rather than with autonomy?
2. How large are the proportion of transactions to the parent

Question 3

What is presentational currency?

Answer 3

The currency in which the financial statements are presented - CHOICE

Question 4

How should foreign currency transactions be recorded initially?

Answer 4

In the entity’s functional currency using the spot rate at that date

Question 5

How should foreign currency transactions be recorded when it is settled?

Answer 5

In the entity’s functional currency using the spot rate at the new settlement date, with any exchange gain or loss on settlement taken to the P&L in that period

Question 6

How should monetary foreign currency transactions be recorded at period end when they are not settled?

Answer 6

Retranslated spot rate at the period end date, with any exchange gain or loss on settlement taken to the P&L

Question 7

How should non-monetary foreign currency transactions be recorded at period end when they are not settled?

Answer 7

Measured at historical cost, NOT retranslated and so no exchange gains or losses arise

Question 8

How are items from the subsidiaries P&L translated to the group functional currency on consolidation?

Answer 8

Using the average rate for the period

Question 9

How are most items from the subsidiaries SFP translated to the group functional currency on consolidation?

Answer 9

At the year end closing rate

Question 10

How is goodwill translated to the group functional currency on consolidation?

Answer 10

Goodwill is calculated at acquisition in the sub’s local currency and translated every year at the year end closing rate

Question 11

Where are exchange gains or losses on retranslation of goodwill taken?

Answer 11

To reserves

Question 12

How are share capital and pre-acquisition reserves translated to the group functional currency on consolidation?

Answer 12

At the historic rate

Question 13

How are post-acquisition reserves treated in group functional currency on consolidation?

Answer 13

As a balancing figure - include average rate and exchange differences on net assets to date

Question 14

Where are exchange gains or losses on retranslation of goodwill and net assets/liabilities taken?

Answer 14

Directly to equity, split between foreign exchange reserves (group share) and NCI