Question

If the foreign subsidiary's financial statements are remeasured in the functional currency due to a mismatch between the functional currency and the local currency, describe the subsidiary's sales, cost of sales, trade receivables and the applicable exchange rate.

Answer 1

• Foreign currency monetary items = translate using closing rate
• Foreign currency non-monetary items that are measured in terms of historical cost = translate using the rate at the date of the transaction
• Foreign currency non-monetary items that are measured at Fair Value = translate using the rate when the fair value was measured;

Exchange difference shall be recognised in profit or loss.

Sales=date of transaction

Cost of sales=date of transaction

Trade receivable=closing rate