Foreign transactions

Question 1

Functional currency
Presentation currency
Monetary items

Answer 1

Functional currency - primary economic environment, used for measurement
Presentation currency - presented in FS
Monetary items - currency held and assets/liabilities to be received or paid in currency

Question 2

Changes to functional currency

Answer 2

Once determined cannot be changed unless change to underlying transactions

Not retrospective

Question 3

Foreign to functional

Answer 3

Initial recognition: use spot rate
At reporting date:
Monetary assets/liabilities = restated at closing rate
Non monetary (at cost) = Not restated, remain at historic cost
Non monetary (at FV) = Translated at date when FV was measured

FX differences to P&L

Question 4

Presentation currency translation

Answer 4

Assets and liabilities - closing rate
Income and expenses - average rate
FX differences to OCI and equity as translation reserve

Question 5

Foreign operations

Definition

Answer 5

An entity that is a sub, associate, joint arrangement or branch of the reporting entity thats activities are conducted in a currency other than the reporting entity

Question 6

Foreign operations

Translation

Answer 6

Translation: foreign operation determines its own functional currency and prepares its FS in that currency. These FS are then translated per normal translation rules.

Question 7

Foreign operations

Disposal

Answer 7

On disposal the cumulative FX difference in equity (and previously in OCI) are reclassified to P&L at the time of disposal