www.kaplanpublishing.co.uk Section Advanced issues; Foreign currency Answer Beetle October October Purchase of land Less the cash paid 31 December Exchange difference loss Closing balance at year-end Statement of profit or loss Exchange loss Statement of financial position Land Retained earnings Current liabilities DN700,000 ÷7 (DN490,000) ÷7 DN210,000 Balancing figure ÷6 Liability $100,000 ($70,000) $30,000 $5,000 $35,000 $ (5,000) 100,00 (5,000) 35,000 The purchase of the land and the cash paid are transactions that are translated at the exchange rate ruling on the date of the transaction At the year-end the cost of the land is not retranslated as it is a non-monetary item The liability is a monetary item and so retranslated giving rise to a slightly larger liability due to exchange differences and thus a loss A student's guide to Group Accounts by Tom Clendon, Second Edition, published by Kaplan Publishing www.kaplanpublishing.co.uk Section Advanced issues; Foreign currency Answer Ant Exchange difference on goodwill KR 96,000 (16,000) Opening balance Less impairment loss Closing balance ÷ 12 ÷ 10 Balancing figure exchange difference and a gain 80,000 ÷8 $ 8,000 (1,600) 6,400 3,600 10,000 Goodwill is translated at the closing rate The impairment loss is an expense and so is translated at the average rate The closing balance of the asset is larger due to the exchange difference thus it is an exchange gain As it is full goodwill (i.e NCI at acquisition was measured at fair value) then the exchange gain and impairment loss will be allocated between the parent and the NCI Exchange difference on net assets KR 36,000 44,000 Opening balance Post-acquisition profits Closing balance ÷ 12 ÷ 10 Balancing figure exchange difference and a gain 80,000 ÷8 $ 3,000 4,400 7,400 2,600 10,000 Net assets are translated at the closing rate The post-acquisition profits of KR44,000 is a balancing figure and is translated at the average rate The closing net assets are larger due to the exchange difference which is therefore an exchange gain The exchange gain on the retranslation of net assets will be allocated between the parent and the NCI Allocation of the group exchange difference Exchange gain on the goodwill Exchange gain on the net assets Total group exchange gain Parent's % to the group exchange reserve (80% x 6,200) NCI's % to w4 NCI (20% x 6,200) $ 3,600 2,600 6,200 4,960 1,240 6,200 A student's guide to Group Accounts by Tom Clendon, Second Edition, published by Kaplan Publishing ...www.kaplanpublishing.co.uk Section Advanced issues; Foreign currency Answer Ant Exchange difference on goodwill KR 96,000 (16,000) Opening balance Less