FOREX

Forex differences are calculated on the following dates:

• Shipped Free-on-Board

• Translation date

• Transaction date

• Realisation date

Exchange differences are calculated on foreign assets purchased in foreign currency.

• TRUE

• FALSE

Mr X purchased equipment from China for FC 100 000 when the spot rate was R1: FC 0.67. The cost of the asset will be determined in terms of:

• s11(a)

• s12C

• S25D

• S24I

Which exchange rate is typically used to translate income earned in foreign currency for companies?

• Average exchange rate

• Spot rate

• Forward rate

• Fixed exchange rate

Under Paragraph 43(1A) of the Eighth Schedule, how are proceeds from a foreign capital asset disposed of by a company translated to ZAR?

• Spot rate in the year of disposal

• Forward rate agreed during the transaction

• Average or spot rate in the year of disposal

• Average or spot rate when the asset was acquired

Which of the following is true under Section 24I(7)?

• Exchange differences are always recognized in the year the debt arises.

• Exchange differences can only be deferred if the asset is tangible.

• Exchange differences can be deferred until the asset is brought into use.

• Section 24I(7) does not apply to debts incurred for intangible assets.

Foreign exchange differences are only applicable to companies.

• TRUE

• FALSE

Under Section 24I, natural persons can choose between the spot rate and average rate for exchange differences on debt incurred at realisation date.

• TRUE

• FALSE

Answer explanation

Debt is ALWAYS translated at Spot Rate

A South African company purchases goods from a foreign supplier on 1 March 2025 for $100,000. 50% payment is made on 30 June 2025. The following exchange rates are available:

• 1 March 2025 : $1 = ZAR 18.50

• 30 June 2025 : $1 = ZAR 18.70

• 31 December 2025 : $1 = ZAR 19.00

Calculate exchange differences for the 2025 Year of assessment ended 31 December.

• R25 000 forex gain

• R25 000 Forex loss

• R50 000 Forex loss

• R35 000 Forex loss

A company purchases equipment on 1 February 2025 for $50,000 it was shipped FOB on 16 February 2025, financed by a foreign loan. The equipment has not yet been brought into use by 28 February 2025 (Year-End). The loan is settled on 31 May 2025. The following exchange rates are available:

• 1 February 2025 : $1 = ZAR 18.40

16 February 2025 : $1 = ZAR 18.90

• 28 February 2025 :$1 = ZAR 18.60

• 31 May 2025 : $1 = ZAR 19.20

Calculate the net exchange differences in the 2025 and 2026 Year of Assessment:

• 2025: R15 00 Forex Gain

  2026: R30 000 Forex Loss

• 2025: R15 000 Forex Loss

  2026: R30 000 Forex Gain

• 2025: Rnil

  2026: R15 000 Forex Loss

• 2025: R10 00 Forex Loss

  2026: R30 000 Forex Gain