Foreign Subsidiaries - F2

Question 1

What rate do we use to translate income and expenses?

Answer 1

Average for the year

Question 2

What rate do we use to calculate assets and liabilities?

Answer 2

Closing rate

Question 3

What rate do we use to calculate the goodwill of subsidiary?

Answer 3

Closing rate

Question 4

Where are any exchange differences recorded?

Answer 4

Equity and other comprehensive income

Question 5

How do we translate net assets and how are the exchange differences split?

Answer 5

Opening net assets - opening rate
Total comprehensive income - average rate
Closing net assets - closing rate

Split between Parent and NCI based on group shareholdings

Question 6

How do we translate goodwill and how are the exchange differences split?

Answer 6

GW b/f - opening rate
Impairment - average rate
GW c/f - closing rate

FV method used proportion is allocated between NCI and parent, Proportionate method used exchange difference is allocated only to the parent.

Question 7

What is functional currency?

Answer 7

Currency of the primary economic environment in which the entity operates

Question 8

What factors should we consider when determining functional currency?

Answer 8

Currency that influences sales prices
Currency of the country whose competitive forces and regulations mainly determine the sales prices of goods and services
The currency that mainly influences labour, material and other costs of providing goods and services
The currency in which funding from issuing debt and equity is generated
The currency in which receipts from operating activities are usually retained

Question 9

What is presentation currency?

Answer 9

Currency in which the entity presents its financial statements