CERTYNEX IFRS ACADEMY

Halden buys a machine for 45,000 dollars at the rate of 0.88 euro, i.e. 39,600 euros. At the closing date the rate is 0.93 euro; its accountant translates the machine at 41,850 euros and recognises a gain of 2,250 euros. What is the error?

The machine, a non-monetary item at historical cost, stays at the rate of the transaction date: no retranslation and no gain.

The machine must be retranslated at the closing rate, but the gain must then be taken directly to equity, outside profit or loss.

The machine must be translated at the average rate for the year, never at the closing rate or the transaction rate.

The machine must be retranslated at the rate of the opening date of the year rather than at the closing date.