PRACTICE KIT

CFAP 1: ADVANCED ACCOUNTING AND FINANCIAL REPORTING

CHAPTER 19: IAS 21 – FOREIGN CURRENCY IN INDIVIDUAL FINANCIAL STATEMENTS

15. Orlando (Inventory + PPE)

(a) Year to June Year 4
The revenue and the receivable for the sale of €96,000 should be translated at the spot rate of 0.8 =
$120,000
The capital expenditure of €1m should also be translated at the spot rate of 0.8:
Debit Property, plant and equipment $1,250,000
Credit: Payables $1,250,000.
The receipt on 12 June relating to the receivable is translated at the rate at that date of 0.9.
This generates cash of $106,667 to settle a receivable of $120,000. Hence an exchange loss of $13,333 is
recognised in profit or loss.
The non-current asset is not re-translated at the year end, but the outstanding payable (a monetary item)
must be re-stated to the year-end exchange rate of 0.7. This gives a yearend payable balance of
$1,428,571. This has increased from the initial $1,250,000; therefore an exchange loss of $178,571 will be
recognised in profit or loss.
(b) Year to June Year 5
When the payable is settled after the year end at the spot rate of 0.8, it results in a payment of $1,250,000.
There is an exchange gain of $178,571 compared with the carrying value at the end of Year 4.

16. Omega Limited (Dividend + FC)

Extract from Statement of comprehensive income for the year ended 31 December 2013
▪ Profit for the year: Rupees
Dividend received from AWL (IFRS 9,B5.7.5.1) (20,000*10*15%*26.5) 795,000
Transfer of FV gain reserve of 31-12-2012, on derecognition of AWL
investment W.1 500,000
FV / exchange gains on valuation of AWL shares on 1-6-2013 W.1 2,124,000
Loss on de-recognition of AWL' shares W.1 ( 308,000)
Other comprehensive income:
FV gain/(loss) on investment available for sale W.1 693,000
Exchange gain on investment available for sale W.1 225,225

FV per Investment Gain /

W-1 Date No. of share (loss) Remarks
shares
AED AED Conv.@ Rupees Rupees
1-May-2012 20,000 12.00 240,000 25.00 6,000,000
31-Dec-2012 20,000 13.00 260,000 25.00 6,500,000 500,000 FV gain
1-Jun-2013 22,000 14.00 308,000 28.00 8,624,000 2,124,000 Gain on
(20,000x valuation of AWL
1.1) on its acquisition
by HL

1-Jun-2013 16,500 18.00 297,000 28.00 8,316,000 Loss on de-

(22,000/ (308,000) recognition of
4*3) AWL
shares

31-Dec-2013 16,500 19.50 321,750 28.00 9,009,000 693,000 FV gain

From the desk of Hassnain R. Badami, ACA

TSB Education-Premium Accountancy Courses P a g e 53 of 318