Hawk Ltd Has Borrowed Substantially in Foreign Currency Loans

question 4

Multiple Choice

Hawk Ltd has borrowed substantially in foreign currency loans.An unexpected major downturn in the Australian economy after reporting date has substantially weakened the Australian dollar.It appears that Hawk Ltd will not be able to meet the foreign currency debt as it falls due.According to AASB 110,how should this event be reported in the financial statements?

• A) Additional extensive disclosure of the realisation value of assets and the amounts at which liabilities are expected to be settled.
• B) The assets should be recognised in the financial statements at fair value and the liabilities reported at their settlement amounts.
• C) Additional extensive disclosures about the timing and maturity date of debts and the cash flow shortfalls expected.
• D) A recasting of the financial statements using fair value basis.
• E) None of the given answers.

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Definitions:

Operating Loss

A situation where a company's operating expenses exceed its revenues, indicating that it is not currently profitable.

Year 2

Typically refers to the second year in a given context, such as financial reporting, analysis, or planning.

Variable Costing

An accounting method that only includes variable production costs (costs that change with production levels) in product costs.

Unit Product Cost

The total cost associated with manufacturing a single unit of product, which includes direct materials, direct labor, and overhead.