T14 Foreign transactions

Question 1

What is functional currency?

Answer 1

The main currency, which the company operates with, used to measure the finacial statements

Question 2

What is presentation currency?

Answer 2

This the currency the business chooses to present in, we change from functional to presntation

Question 3

What indicators can be used to understand which currency is the functional currency?

Answer 3

Sales prices, Labour costs, Material Costs, other costs, which currency is Finance generated.

Question 4

What are monetray items?

Answer 4

Assets and liabilities taht can be converted in to cash easily.

Question 5

What is the:
1.) Historic rate?
2.) Closing Rate?
3.) Average Rate?

Answer 5

1.) The rate the transaction occured
2.) The rate at the year end
3.) Teh average rate throughout the whole year.

Question 6

What is a non-monetary item?

Answer 6

No right to receive cash, We’d have to sell it, e.g inventory and plant and machinery.

Question 7

How to recognise the exchange differences?

Answer 7

Differences are recognised in the P&L in the period they incurred. Trading transaction differences are placed in other income/ expenses and Finance differences are placed in finance income / costs.

Question 8

When would the currency change?

Answer 8

If a whole market changed, or something of that nature.