Exchange differences arising when translating from the functional currency into the presentation currency are recognised in other comprehensive income and:
A) recorded as a deferred asset and amortised over the expected useful life.
B) recognised in profit or loss.
C) accumulated in equity using a 'foreign currency translation reserve'.
D) accumulated in equity using retained earnings.

Question

Quizplus · Accepted Answer

Exchange differences arising from the translation of the financial statements from the functional currency to the presentation currency are recognized as other comprehensive income and accumulated in equity using a 'foreign currency translation reserve'. This reserve is a component of equity and reflects the cumulative amount of exchange differences arising from translation. The other options (A, B, and D) are incorrect as they do not correctly reflect the accounting treatment for exchange differences arising from translation.

Exchange Differences Arising When Translating from the Functional Currency into the Presentation