When Translating Foreign Currency Denominated Financial Statements into the Functional

question 5

Multiple Choice

When translating foreign currency denominated financial statements into the functional currency, the exchange differences are recognised:

• A) in profit or loss in the period in which they arise.
• B) directly in the retained earnings account.
• C) as a deferred asset or liability and amortised over a period of 10 years.
• D) as a separate component of equity.

---

Definitions:

Disaster Relief

Assistance provided to individuals, businesses, and communities affected by natural or human-made disasters, aiming to help them recover.

Crop Insurance

Insurance that farmers can purchase that will pay out if crop selling prices or crop revenues fall below predetermined values.

Moral Hazard

A situation where one party takes greater risks because they do not have to bear the full consequences of their actions.

Subsidized

Financial support provided by a government or organization to reduce the cost of producing goods or services, often to encourage consumption or investment.