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1. An entity uses the Dollar as its functional currency. The entity has grown and exports to Europe and conducts business through a branch. For the two years to 31 December 2008, 90 per cent of the business was conducted using the Euro as the business currency. The functional currency should at 31 December 2008 –
2. An entity, whose functional currency is the Dollar, has a foreign subsidiary. The subsidiary declared a dividend to the parent of 9 million Euros which was recorded in the parent financial statements. The exchange rate at that date was 1.5 Euros = 1 Dollar. At the date of receipt of the dividend, the exchange rate had moved to 1.6 Euros = 1 Dollar. The exchange difference arising on the dividend would be treated as follows in the financial statements
3. An entity has a subsidiary which operates in a country where the exchange rates are volatile and there are wild seasonal variations in costs and revenue. Which rates of exchange may best be used to translate the foreign subsidiary statement of comprehensive income?
4. An entity, whose functional currency is the dollar, purchases machinery from a foreign supplier for 8 million Euros on 31 October 2008 when the exchange rate was 1.5 Euros = 1 dollar. At the year-end of 31 December 2008, the amount has not been paid. The closing exchange rate was 1.25 Euros = 1 dollar. Which of the following statements are correct?
5. Which of the following factors would not be used in determining the functional currency of the entity?
6. An entity started trading in the USA. After several years the entity expanded trading in Europe through a subsidiary. The subsidiary is essentially an extension of their own business and the directors of the two entities are the same. The functional currency of the subsidiary is –
7. An entity has a foreign subsidiary whose carrying value at cost is $35 million. It sells the subsidiary on 31 December 2008 for 52 million Euro. As at 31 December 2008, the credit balance on the exchange reserve which relates to this subsidiary was $8 million. The functional currency of the entity is the dollar and the exchange rate on 31 December 2008 is $1 = 1.3 Euro. The net asset value of the subsidiary at the date of disposal was $34 million. What is the profit or loss on the sale of the subsidiary that will appear in the group statement of comprehensive income?
8. Where a foreign entity functions independently from the parent, the functional currency of the foreign entity will be –
9. An entity, whose functional currency is the dollar, acquired 100% of the equity capital of a foreign entity at a consideration of 19 million Euros on 30 June 2008.The fair value of the net assets of the foreign entity at that date was 16 million Euros. The exchange rates at 30 June 2008 and 31 December 2008 were 1.2 Euros = 1 dollar and 1.4 Euros = 1 dollar respectively. What figure for goodwill should be included in the group financial statements for the year ended 31 December 2008 if goodwill is not impaired?
10. An entity, whose functional currency is the Dollar, has a foreign subsidiary. The subsidiary sold goods to the parent for 42 million Euros when the exchange rate was 2 Euros = 1 Dollar .The cost of the goods to the subsidiary was 24 million Euros. The goods were unsold at the year end of 31 December 2008 when the exchange rate was 1.5 Euros = 1 Dollar. What is the value of the intra group profit which will be eliminated at 31 December 2008?
11. Which of the following statements is not correct?
12. IAS 21 applies to the presentation in a statement of cash flows of the cash flows arising from transactions in a foreign currency, or to the translation of cash flows of a foreign operation.
13. Which of the following terms are defined by the statement: “The currency of the primary economic environment in which the entity operates”?
14. Exchange rate is the ratio of exchange for __________.
15. Number of Currencies as per IAS 21
16. According to IAS 21, a foreign operation can be:
17. According to which IAS are dividends paid at the spot rate?
18. Which of the following is the type of currency which the financial statements of the group are not presented in
19. In which financial statement is foreign currency mainly disclosed?
20. In accordance with IAS 21 The Effect of Changes in Foreign Currency Exchange Rates, which of the following foreign currency exchange rates may be used to translate the foreign currency purchases and sales?
(1) The rate which existed on the day that the purchase or sale took place
(2) The rate which existed at the beginning of the accounting period
(3) An average rate for the year, provided there have been no significant fluctuations throughout the year
(4) The rate which existed at the end of the accounting period
21. At each subsequent reporting date, Foreign currency monetary amounts should be reported using:
22. At each subsequent reporting date, Non-monetary items carried at historical cost should be reported using the exchange rate:
23. At each subsequent reporting date, Non-monetary items carried at fair value should be reported at the rate that existed when the fair values were determined
24. At each subsequent reporting date, Exchange differences arising when monetary items are settled or when they are translated at different rates from initial recognition or previous financial statements are reported in:
25. At each subsequent reporting date, If a gain or loss on a non-monetary item is recognised in other comprehensive income, any foreign exchange component of that gain or loss is also recognised in: