IAS 21

Question 1

Ias 21 deals with what?

Answer 1

it deals with effect of changes in foreign exchange rates

Question 2

It prescribes how to include foreign currency transaction and foreign operations in the financial statements of a company. True or False?

Answer 2

True. It also prescribes how to translate financial statements into presentation currency

Question 3

What are the benefits of IAS 21?

Answer 3

It reduces the risk of foreign currency transactions being wrongly accounted for

Question 4

What is the scope of IAS 21?

Answer 4

1. Accounting for transactions and balances in foreign currencies
2. Translating the results and financial position of foreign operations
3. Translating an entity’s results and financial position into presentation currency

Question 5

What is outside the scope of IAS 21?

Answer 5

1. Derivative transactions in foreign currencies and balances
2. Hedge accounting
3. The presentation of cash flows arising from transactions in a foreign currency

Question 6

If the activities of a foreign operation are carried out as an extension of a reporting entity rather than without a significant degree of autonomy. This means functional currency will be different. True or false?

Answer 6

False. This means that the functional currency should be the same as the reporting entity

Question 7

An example of activities of a foreign operation being an extension of a reporting entity is when the foreign operation sells goods imported from the reporting entity and remits the proceeds back to it.

Answer 7

True.

Question 8

Give an example of a foreign operation carrying out a significant degree of autonomy

Answer 8

This is when a foreign operation generates income, incurs expenses, and arranges borrowings such that it is a self contained operation.

Question 17

Another instance where the functional currency of a foreign operation is determined by the presentation currency of the reporting entity is when the transactions with the reporting entity are a significant proportion of its activities. True or false.

Answer 17

True.