When translating the financial statements of a foreign operation to presentation currency,AASB 121 requires any gain or loss on translation of the accounts to be:
A) Recognised as a revenue or expense in the income statement.
B) Transferred to a reserve in the equity section of the balance sheet.
C) Deferred and amortised over a period of not greater than 20 years.
D) Written off against the non-monetary assets of the foreign operation with any balance remaining recognised as a revenue or expense in the period.
E) None of the given answers.

Question

Quizplus · Accepted Answer

AASB 121 requires any gain or loss on translation of the accounts of a foreign operation to be transferred to a reserve in the equity section of the balance sheet, commonly known as the foreign currency translation reserve. This reserve is used to accumulate the cumulative amount of the gains or losses recognized over time, and is not recognized as revenue or expense in the income statement.

When Translating the Financial Statements of a Foreign Operation to Presentation