Question bank — IAS 21 — The Effects of Changes in Foreign Exchange Rates
104 questions in FR/EN/ES, scored by the real scoring engine.
Purpose of the standard1 question
What the standard covers2 questions
- Which of the following falls within the scope of IAS 21?Single choiceL1Variant
- Aldric, whose accounts are in euros, consolidates a subsidiary in Switzerland whose financial statements are in Swiss francs. Aldric asks which standard to use to bring this subsidiary's statements into its consolidated accounts. What is the consistent analysis?Single choiceL2Variant
Foreign currency derivatives excluded1 question
Hedge accounting excluded2 questions
- For the hedge of a net investment in a foreign subsidiary, Vexil writes in its accounting policies note: "The hedge accounting requirements are set by IAS 21." What is the error?Single choiceL2
- Ardenne, whose functional currency is the euro, has a dollar borrowing (a monetary item). Case data: it designated the borrowing as the hedging instrument of the foreign currency risk on future dollar purchases, in a cash flow hedge that meets the IFRS 9 conditions; at the closing date, the hedge is fully effective. How is the exchange difference on the borrowing treated?Single choiceL2
Foreign currency cash flows (IAS 7)1 question
Foreign currency and foreign currency transaction2 questions
Spot rate2 questions
- The spot exchange rate is the exchange rate for immediate delivery.True / falseL1Variant
- Dalbek receives three quotations for the same currency: a rate for immediate delivery of 0.92, a rate agreed today for delivery in six months of 0.94, and the month's average rate of 0.93. Which one is the spot rate?Single choiceL2Variant
Closing rate2 questions
Exchange difference2 questions
- An exchange difference is the finance cost representing the cost of borrowing in a foreign currency.True / falseL1
- Perrand translates 10,000 dollars at 0.90 euro on the date of a transaction, then the same 10,000 dollars at 0.93 euro at the closing date. What does the difference of 300 euros between the two translations represent?Single choiceL2
Monetary and non-monetary items2 questions
- Tarvin paid a foreign supplier an advance of 20,000 dollars for the delivery of a machine. Its accountant writes: "This advance is a monetary item, so it will be translated at the closing rate." What is the error?Single choiceL2
- The Halvor group holds: a lease liability in dollars (rent owed), a cash-settled provision in dollars, an advance paid in dollars for a machine, and a contract to deliver a variable number of its own shares with a fair value equal to 100,000 dollars. Classify each item as monetary or non-monetary and justify your approach, separating case facts, rule and judgement.JudgmentL3
Foreign operation2 questions
- Which entity meets the definition of a foreign operation?Single choiceL1
- Brenne, established in France and presenting its accounts in euros, holds a subsidiary also located in France, but whose activities are conducted in dollars with American customers. Is this subsidiary a foreign operation?Single choiceL2
Primary indicators2 questions
- Which of these is a primary indicator of the functional currency, to be considered first?Single choiceL1Variant
- Nordelle, established in the euro area, sells its products on the Swiss market where local competition and regulation determine the prices, denominated in Swiss francs. Its production costs are also mainly in Swiss francs. Where does management begin its analysis of the functional currency?Single choiceL2Variant
Secondary factors1 question
Mixed indicators and judgement1 question
Factors specific to a foreign operation1 question
Overall determination1 question
Initial recognition3 questions
- A foreign currency transaction is initially recorded at the closing rate of the period, whatever the date of the transaction.True / falseL1
- Aldric, whose functional currency is the euro, buys goods invoiced at …. The spot rate at the date of the transaction is 0.92 euro per 1 dollar. Calculate the amount to record in euros.CalculationL1
- Dorian, whose functional currency is the euro, receives goods invoiced at … by an American supplier. The spot rate at the date of the transaction is 0.92 euro per 1 dollar, i.e. …. Post the initial recognition entry.Journal entryL2
Spot rate of the transaction3 questions
- On 12 March, Lorien, whose functional currency is the euro, sells goods invoiced in dollars. Which rate does it use to record the sale?Single choiceL1
- Maurin, whose functional currency is the euro, sells goods invoiced at …. The spot rate at the date of the transaction is quoted as: 1 euro = 1.25 dollars. Calculate the amount to record in euros.CalculationL2
- Rivane, whose functional currency is the euro, receives a machine invoiced at … by a British supplier. The spot rate at the date of the transaction is 1.15 euros per 1 pound, i.e. …. Post the initial recognition entry.Journal entryL2
Transaction date2 questions
- The date of the transaction is the date on which it first qualifies for recognition.True / falseL1
- Evrard orders goods in dollars on 5 April; it receives them and obtains control of them on 20 April, the invoice is issued on 28 April and payment takes place on 15 May. Its accounting policy note states: "The date of the transaction is the payment date." What is the error?Single choiceL2
Average rate as an approximation1 question
Monetary items at the closing rate3 questions
- A receivable denominated in a foreign currency remains measured at the rate of the transaction date until it is settled, without being translated at the closing date.True / falseL1
- Quenet, whose functional currency is the euro, holds at the closing date a receivable of …. The closing rate is 0.96 euro per 1 dollar. Calculate the receivable in euros at the closing date.CalculationL1
- Sorel holds a receivable of …, recorded at … at the rate of 0.89 euro per 1 dollar. At the closing date the rate is 0.93 euro, i.e. …. Post the closing translation entry.Journal entryL2
Non-monetary items at historical cost3 questions
- 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?Single choiceL1
- Lenoir buys equipment for … at the spot rate of 0.90 euro per 1 dollar. The closing rate is then 0.94 euro. The equipment is measured at cost (case convention: depreciation ignored). Calculate its carrying amount in euros at the closing date and the exchange difference to recognise.CalculationL2
- Perrot pays cash for a machine of … at the spot rate of 0.88 euro per 1 dollar, i.e. …. Post the acquisition entry, the machine being subsequently measured at cost.Journal entryL2
Non-monetary items at fair value3 questions
- Gavrel holds a plot of land abroad measured at fair value, expressed in pounds. The fair value was determined on 30 November, when the rate is 1.18 euros per 1 pound; at 31 December, the closing date, the rate is 1.20 euros. Which rate translates the fair value into euros?Single choiceL2
- Mercier measures an investment property abroad at fair value: …, determined at a date when the rate is 1.17 euros per 1 pound. The later closing rate is 1.21 euros. Calculate the amount in euros to use.CalculationL3
- Corbin revalues a foreign building at …, the fair value being determined at a date when the rate is 0.93 euro per 1 dollar, i.e. 483,600 euros. Its carrying amount is …. Case convention: the revaluation is recognised in other comprehensive income. Post the revaluation entry for the amount ….Journal entryL3
Comparison of two amounts1 question
Differences on monetary items in profit or loss3 questions
- The exchange difference on a trade payable denominated in a foreign currency is taken directly to equity.True / falseL1
- Varennes settles a payable of …, recorded at …. The spot rate at the settlement date is 0.97 euro per 1 dollar. Calculate the cash paid in euros and the exchange loss to recognise in profit or loss.CalculationL2
- Ardent settles a payable of …, recorded at …. At the spot rate of 0.95 euro per 1 dollar at the settlement date, the cash paid is …. Post the settlement entry.Journal entryL2
No difference for a non-monetary item at cost1 question
Exchange component of a revaluation3 questions
- Valmer revalues a foreign plot of land expressed in dollars. Case convention: the revaluation gain of 40,000 euros is recognised in other comprehensive income. Its exchange component is 12,000 euros. Where is this exchange component recognised?Single choiceL2
- Rochet revalues foreign equipment. Case convention: the revaluation is recognised in other comprehensive income. The total revaluation gain, in euros, is …, of which an exchange component of …. Calculate the non-exchange component and the total amount recognised in profit or loss.CalculationL2
- Which of the following statements about the exchange component of the gain or loss on a non-monetary item are correct? More than one answer.Multiple choiceL3
Definition of the net investment1 question
Exchange differences on the net investment1 question
Separate and consolidated statements1 question
Conditions for the change1 question
Prospective application1 question
Translation at the date of the change1 question
The presentation currency is a choice2 questions
Assets and liabilities at the closing rate3 questions
- To translate the financial statements of a foreign subsidiary into the presentation currency (non-hyperinflationary economy), which rate applies to the assets and liabilities of the statement of financial position?Single choiceL1Variant
- The British subsidiary of Hadrel reports at the closing date assets of … and liabilities of …. The closing rate is 1.18 euros per 1 pound; the group's presentation currency is the euro. Calculate the translated assets and liabilities.CalculationL2
- The Ormand group presents year N and the comparative N-1 in euros. Its Swiss subsidiary has net assets of 900,000 Swiss francs at the closing date N (closing rate 1.05 euros) and 800,000 francs at the closing date N-1 (closing rate 1.00 euro). How does it translate the comparative N-1?Single choiceL3Variant
Income and expenses at transaction rates3 questions
- When translating into the presentation currency, income and expenses of each statement of profit or loss are translated at the rates at the dates of the transactions.True / falseL1Variant
- The Lambert group's accountant translates the British subsidiary's profit of 100,000 pounds at the closing rate of 1.18 euros, i.e. 118,000 euros, writing: "Profit is translated like assets and liabilities." What is the error?Single choiceL2Variant
- The British subsidiary of Cordel earns income of … in the first half and … in the second, and incurs expenses of … then …. Case convention: the half-year rates, 1.10 euros then 1.16 euros per 1 pound, approximate the rates at the dates of the transactions. Calculate income, expenses and profit translated into euros.CalculationL3
Average rate for translation3 questions
- For practical reasons, a rate that approximates the rates at the dates of the transactions, for example an average rate for the period, is often used to translate income and expenses.True / falseL1
- The American subsidiary of Marchal earns income of … and incurs expenses of … over the year. Case convention: rates fluctuated little during the year and the average rate of 0.91 euro per 1 dollar approximates the transaction-date rates. Calculate income and expenses translated into euros.CalculationL2
- Fontan's subsidiary earns 70% of its annual revenue in December, while the rate of its currency varied sharply during the year. Management proposes to use the simple average of the January to December rates to translate all income. Write a note assessing this choice, separating case facts, rule and judgement.JudgmentL3
Translation difference and reserve3 questions
- When translating the statements of a foreign operation into the presentation currency, where are the translation differences recognised?Single choiceL2
- The American subsidiary of Villard has opening net assets of …, makes a profit of … and has closing net assets of … (case convention: no dividend or contribution). Rates: 0.90 euro at the opening date, 0.92 euro on average for the profit, 0.95 euro at the closing date. Calculate the translation difference for the year in euros.CalculationL3
- When translating the statements of its foreign subsidiary, the Ramel group obtains a credit translation difference of … for the year. Post the entry recognising this difference.Journal entryL3
Share of non-controlling interests1 question
Translation under hyperinflation1 question
Link with IAS 291 question
Goodwill and fair value adjustments3 questions
- Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of that operation, expressed in its functional currency and translated at the closing rate.True / falseL2
- The Aubrac group acquired an American operation; the goodwill of … is expressed in its functional currency. It was translated at the opening date at 0.90 euro per 1 dollar; the closing rate is 0.95 euro. Calculate the goodwill translated at the closing date and the translation movement for the year.CalculationL3
- The Delcour group holds goodwill of … on a British operation, translated at the opening date at 1.10 euros per 1 pound (330,000 euros). At the closing date the rate is 1.15 euros (345,000 euros), a movement of …. Case convention: the movement is taken to the translation reserve. Post the entry.Journal entryL3
Intragroup monetary balances1 question
Different reporting dates1 question
Reclassification on disposal3 questions
- On disposal of a foreign operation, the cumulative translation differences relating to it are reclassified from equity to profit or loss when the gain or loss on disposal is recognised.True / falseL2
- The Vauclair group disposes of the whole of its foreign subsidiary, owned at 100%. The translation reserve stood at … at the opening date and increased by … up to the date of disposal. The gain on disposal before reclassification is … (case datum). Calculate the amount reclassified to profit or loss and the total gain on disposal.CalculationL3
- Ardoise disposes of its foreign subsidiary, owned at 100%. The cumulative translation reserve, a credit balance, amounts to …. Post the reclassification entry when the gain on disposal is recognised.Journal entryL4
Non-controlling interests on disposal1 question
Proportionate partial disposal1 question
Write-down and disposal1 question
Disclosure of exchange differences1 question
Disclosure about currencies1 question
Disclosure of a change of functional currency1 question
Definition of exchangeability1 question
Estimating the spot rate1 question
Disclosures when not exchangeable2 questions
- In its notes, Brivon, which has estimated a spot rate because of non-exchangeability, discloses only the nature and financial effects of the non-exchangeability. Which required disclosure is missing?Single choiceL3
- Brivon estimated a spot exchange rate because the currency of one of its foreign operations is not exchangeable. When drafting the note, its controller considers that the list of disclosures in para. 57A is self-sufficient and that no other IAS 21 requirement specifies how to apply it. What should he be told?Single choiceL3
Application date and transition1 question
Transaction date of an advance3 questions
- Valdor, whose functional currency is the euro, pays a supplier an advance in dollars on 10 February for a machine that will be delivered and recognised in April. Which date determines the rate applicable to the prepayment asset?Single choiceL2Variant
- Orval pays an advance of … at a date when the spot rate is 0.91 euro per 1 dollar. Delivery takes place later, at a rate of 0.95 euro. Calculate the amount in euros of the prepayment asset.CalculationL2Variant
- Jarnac pays … to a British supplier for goods to be delivered later, at the spot rate of 1.14 euros per 1 pound at the payment date, i.e. …. Post the entry recognising the advance.Journal entryL3