QUESTION 1

1. The main issue in accounting for foreign currency transactionsis:

   		how to distinguish between denomination currency or settlementcurrency.
   		how to translate the financial statements of a foreignoperation.
   		how to treat any foreign exchange differences that arise whenassets or liabilities are remeasured at the end of the reportingperiod using the closing rate.
   		how to record transactions with foreign operations.

0.1 points   

QUESTION 2

1. For a company that has an Australian A$ as its functionalcurrency, which of the following is not a foreign currencytransaction?

   		goods sold at prices denominated in UK pounds.
   		inventory sold to a customer in Hong Kong who pays in A$.
   		borrowing funds where amounts are payable in NZ$.
   		equipment sold at prices denominated in Japanese Yen.

0.1 points   

QUESTION 3

1. In determining an entity's functional currency, factors to beconsidered include which of the following?

   		The currency in which receipts from operating activities areusually retained.
   		The currency that mainly influences sales prices for goods andservices.
   		The currency of the country whose competitive forces andregulations mainly determine the sales price of its goods andservices.
   		All of the above.

0.1 points   

QUESTION 4

1. Which exchange rate is used at the end of the reportingperiod?

   		The closing rate.
   		The indirect rate.
   		The spot rate.
   		The ending rate.

0.1 points   

QUESTION 5

1. A realised exchange difference arises:

   		on remeasurement of a monetary liability at the end of thereporting period.
   		when the exchange rate changes between initial recognition andcash settlement.
   		on initial recognition of a monetary asset.
   		when the exchange rate changes between initial recognition andend of reporting period.

0.1 points   

QUESTION 6

1. At the date of the transaction, a foreign currency monetary itemis initially recognised and measured using:

   		The closing rate.
   		US dollars.
   		The foreign currency monetary value.
   		Spot exchange rate.

0.1 points   

QUESTION 7

1. All of the following assets can be defined as ‘qualifyingassets’ except:

   		manufacturing plants.
   		power generation facilities.
   		investment properties.
   		inventories purchased ready for sale.

0.1 points   

QUESTION 8

1. Which of the following statements is incorrect?

   		Borrowing costs are interest and other costs that an entityincurs in connection with the borrowing of funds.
   		Financial assets and inventories that are manufactured orotherwise produced over a short period of time, and assets that areready for their intended use or sale when acquired, are qualifyingassets.
   		Financial assets and inventories that are manufactured orotherwise produced over a short period of time, and assets that areready for their intended use or sale when acquired, are notqualifying assets.
   		A qualifying asset is an asset that necessarily takes asubstantial period of time to get ready for its intended use orsale.

0.1 points   

QUESTION 9

1. If an Australian (A$) company enters a forward exchange contractto buy US$20,000, then which of the following applies?

   		The company’s contractual obligation (at the forward rate) andcontractual right (at the spot rate) are settled on a netbasis.
   		The company has a contractual right to receive US$20,000 at thesettlement date and that right is an asset fixed in A$ at theforward rate.
   		The company has a contractual obligation to deliver foreigncurrency at the settlement date and that obligation is realised atthe spot rate.
   		The company’s forward contract will act as a hedge against arecognised asset.

0.1 points   

QUESTION 10

1. AASB121/ IAS 21 The Effects of Changes in Foreign ExchangeRates requires that the financial report disclose which of thefollowing?

   		The net exchange differences recognised in OCI and accumulatedin a separate component of equity.
   		The amount of exchange differences recognised in the profit orloss for the period other than those that relate to financialinstruments measured at fair value through profit or loss.
   		Any change in functional currency and reason for change.
   		All of the above.