When translating the revenue and expenses in the statement of profit or loss and other comprehensive income, theoretically each item of revenue and expense should be translated using the spot exchange rate between the:
A) functional currency and the foreign currency on the reporting date.
B) presentation currency and the local currency on the transaction date.
C) presentation currency and the functional currency on the reporting date.
D) functional currency and the foreign currency on the date the transaction occurred.

Question

Quizplus · Accepted Answer

The correct approach for translating revenue and expenses in financial statements is to use the spot exchange rate between the functional currency and the foreign currency on the date the transaction occurred. This method ensures that the financial statements accurately reflect the economic conditions at the time of each transaction.

When Translating the Revenue and Expenses in the Statement of Profit