Under the translation method required by IAS 21,the approach to translating a foreign operation's financial statements includes:
A)translating post-acquisition changes in equity at the exchange rate current at the date of the change.
B)translating non-monetary assets at the spot exchange rate at the date of the purchase transaction.
C)translating revenue and expense items at the average rate for the period where the revenues and expense transactions have been evenly distributed over the period.
D)translating proposed distributions from retained profits at the exchange rate current when the distributions are completed in cash.

Question

Quizplus · Accepted Answer

According to IAS 21, revenue and expense items are usually translated using the average exchange rate for the period. This is appropriate if the exchange rates have fluctuated significantly during the reporting period, and the revenues and expenses are evenly distributed over the period. Translating non-monetary assets at the spot exchange rate at the date of the purchase transaction (option B) is not correct, as the date of the transaction could be different from the reporting period. Translating proposed distributions from retained profits at the exchange rate current when the distributions are completed in cash (option D) is also not correct, as they do not have an impact on the translation of the financial statements. Translating post-acquisition changes in equity at the exchange rate current at the date of the change (option A) is correct, but it is not the only approach to translating a foreign operation's financial statements.

Under the Translation Method Required by IAS 21,the Approach to Translating