FR-Ch-10 foreign currency

IAS 21 sets out how entities that carry out transactions in a foreign currency should measure the results of these transactions at the year end.
Using the picklist provided, select which exchange rate should non-monetary items carried at historical cost be measured?

• The Closing rate

• The Average rate

• The Rate at date of transaction

• The Rate at beginning of the year

When a single entity makes purchases or sales in a foreign currency, it will be necessary to translate the transactions into its functional currency before the transactions can be included in its financial records. 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.

• (2) and (4)

• (1) only

• (3) only

• (1) and (3)

IAS 21 The Effects of Changes in Foreign Exchange Rates defines the term ‘functional currency’. Which of the following is the correct definition of ‘functional currency’?

• The currency in which the financial statements are presented

• The currency of the country where the reporting entity is located

• The currency that mainly influences sales prices and operating costs

• The currency of the primary economic environment in which an entity operates

An entity took out a bank loan for 12 million dinars on 1 January 20X1. It repaid 3 million dinars to the bank on 30 November 20X1. The entity has a reporting date of 31 December 20X1 and a functional currency of dollars ($). Exchange rates are as follows:
Dinars: $1
1 January 20X1 6.0
30 November 20X1 5.0
31 December 20X1 5.6
What is the total loss arising (to the nearest $000) on the above transactions in the year ended 31 December 20X1?

• $208,000

• $207,000

• $209,000

• $$204,000

A manufacturing entity buys a machine (an item of property, plant and equipment) for 20 million dinars on 1 January 20X1. The machine is held under the cost model and has a useful life of 20 years. The entity has a reporting date of 31 December 20X1 and a functional currency of dollars ($). Exchange rates are as follows:
Dinars: $1
1 January 20X1 2.0
31 December 20X1 3.0
Average rate for year‐ended 31 December 20X1 2.5
What is the carrying amount of the machine as at 31 December 20X1?

• $9.7 million

• $9.6 million

• $9.5 million

• $6.3 million