Multinational Operations

Question 1

What is the Presentation Currency

Answer 1

Currency in which the Parent presents its financial statements

Question 2

What two main factors determine Functional Currency

Answer 2

Currency of primary economic activities

Determined by management

Question 3

Describe Foreign Currency Transaction Exposure?

What accounts do these relate to?

Answer 3

Risk that exchange rate changes before a transaction is settled.

Accounts receivable and Accounts payable

Question 4

Where is transaction FX gain or loss recognised?

Answer 4

Income statement

Question 5

What is the effect of a balance sheet date on fx gain/loss between transaction date and settlement date

Answer 5

Transaction gain/loss is attributed between the two periods:

1. Transaction date -> BS date
2. BS date -> Settlement date