Foreign currency

Question 1

What is Functional Currency

Answer 1

the currency of the primary economic environment in which an
entity operates

Question 2

What is Presentation Currency

Answer 2

the currency in which the financial statements are presented

Question 3

What are the Factors influencing functional currency

Answer 3

the currency that influences sales prices
the currency that influences labour, material and other costs.

Question 4

Unsettled balances at the reporting date - The treatment of a balance at the reporting date depends on whether it is

Answer 4

monetary or non-monetary.

Question 5

For monetary items you

Answer 5

Retranslate using the closing rate of exchange.

Exchange gains or losses to SPL

Question 6

For Non-monetary items you

Answer 6

Do not re-translate.
If held at fair value, then the fair value should be translated using the rate on the revaluation date.

Question 7

Historic rate:
Closing rate:
Average rate:

Answer 7

rate in place at the date the transaction takes place, sometimes referred to as the spot rate.

rate at the reporting date.

average rate throughout the accounting period.

Question 8

Functional currency:

Answer 8

‘the currency of the primary economic environment in which an entity operates’ (IAS 21, para 8). This will usually be the currency in which the majority of an entity’s transactions take place.

Question 9

Presentation currency:

Answer 9

‘the currency in which the financial statements are presented’

Question 10

If the exchange difference relates to trading transactions it is disclosed within X.

If the exchange difference relates to non-trading transactions it is disclosed within X.

Answer 10

other operating income/operating expenses.

interest receivable and similar income/finance costs.