A subsidiary of a U.K. parent is located in Venezuela, which is designated as a highly inflationary country. The currency of Venezuela is the bolivar fuerte, or Bs.F. The subsidiary's functional currency is the bolivar fuerte. Several years ago the subsidiary purchased land for Bs.F 1 million when the price level index was 100 and the exchange rate (£/Bs.F) was £1.50. At the end of the current year, the subsidiary still holds the land, and the price level index has risen to 2,000, while the exchange rate is £0.07.
Required
a. Convert the land balance to pounds, following U.S. GAAP.
b. Convert the land balance to pounds, following IFRS.

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The Answer of A subsidiary of a U.K. parent is located in Venezuela, which is designated as a highly inflationary country. The currency of Venezuela is the bolivar fuerte, or Bs.F. The subsidiary's functional currency is the bolivar fuerte. Several years ago the subsidiary purchased land for Bs.F 1 million when the price level index was 100 and the exchange rate (£/Bs.F) was £1.50. At the end of the current year, the subsidiary still holds the land, and the price level index has risen to 2,000, while the exchange rate is £0.07.
Required
a. Convert the land balance to pounds, following U.S. GAAP.
b. Convert the land balance to pounds, following IFRS.

A Subsidiary of a U