FR - Foreign Currency transaction

Question 1

What is defined as a foreign currency transaction

Answer 1

• Occurs in a different currency than that in which a company normally operates
• Can be routine or non-routine (ex. Canadian firm buys inventory from a U.S.S company and pays in USD)
• Objective is to accurately measure the impact of the transaction on the entity and to facilitate integration with the company

Question 2

Provide an example of directly or indirectly quoted foreign currency transaction

Answer 2

Directly: Provides the number of Canadian dollar required to purchase one unit of foreign currency
$1USD = 1.41 CAD
Indirectly - Provides number of foreign currency required unit needed to purchase one unit of CAD
$1CAD = $0.7072USD
- Reciprocal of CAD equivalent method

Question 3

What is the difference between functional and presentation currency

Answer 3

Functional currency - Currency, the economic environment in which it operates. Functional currency is the dollar that it primarily uses day to day operates

Presentation currency - Currency in which an entity reports its financial result
- Canadian entity functional currency is in CAD

Question 4

How is the initial measurement recorded

Answer 4

• Transaction should be recorded using the exchange rate at the date of the transaction
  Average exchange rate - may be used for transactions during a given period if the transaction occurs evenly and the exchange rate does not fluctuate significantly

Question 5

Provide the subsequent measurement of the foreign currency transaction

Answer 5

Items on SFP, asset and liability has been impacted by foreign currency fluctuation since the item was last reported must be consider

Monetary item
- Cash as well as asset and liability to be received or paid at a fixed or determinable number of unit
Ex. A/R, A/P, loans
Closing rate - spot exchange rate at the end of the reporting period

Non-monetary item
- Inlcudes asset and liabilities that will not be received or paid in fixed or determinable number of unit of currency
Ex. Inventory, interest expense, PPE, intangible asset
- item primarily continues to be measured at historical cost. No gain or loss to be consider

Question 6

Explain the change in item measured at FV

Answer 6

• If the item is measured at fair value such as a property account, use the revaluation method
• Item measure at FV was last determined, rather than the closing rate of SFP
• Gain or losses for non-monetary items subsequently measured at FV, not directly reported; rather revaluation gain or loss is reported on the Statement of Comprehensive income

Question 7

How it derecognition determined for foreign currency transaction

Answer 7

• The assets and liabilities incurred in foreign currency does not pose any special changes
• Monetary assets and liabilities are first revalued using sports exchange on the derecognition date and derecognized in the normal way

Question 8

What is the Handbook used under IFRS and ASPE for foreign currency transaction

Answer 8

IAS 21
ASPE 1651

Question 9

What is the presentation and disclosure for foreign currency transactions and provide if ASPE is different from IFRS

Answer 9

Presentation
- Entity functional currency
- Amount of foreign exchange gain/loss SCI
- Change in functional currency during the year

ASPE states to apply the exchange rate in effect at the B/S date to foreign currency FV to asset or liability - non-monetary asset, liabilities that are carried.