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  1. avatar says

    All three lectures on Foreign Currency Matters seem to be exactly the same lecture! All lasting about 36.5 minutes long, with a section about 3/4 the way regarding the inventory account. Is this a problem my side, or is it a problem with the Open Tuition links. Thanks!

      • avatar says

        I wasn’t suggesting you were doing three identical lectures! That might have been a bit unnerving for your students!

        But have you clicked on the 2nd and 3rd videos in this section? I’ve just tried on my netbook (I was on my laptop before) and I’m getting the same result.

        Apart from obviously wanting to view the other videos, I’m keen to put off the cash flow lectures for a bit longer…it’s not my favourite area!

        Incidentally, I’ve watched all the lectures in the past, I’m coming back to it again after failing P2 last year!

  2. Profile photo of Swati says

    Hi Sir,

    A small thing I had to ask here:
    I understood that closing bal of borrowings has increased due to the change in Foreign currency rate. But why do we not make any adjustment in the Interest Part?
    Alpha has charged $ 5000 million as Finance cost to P/L. But actually, the charge should be 58800 x 11.1% = 6527 $ Isn’t it? But the solution is showing nothing with respect to the finance cost.

    Its an adjustment of Cons. B/S (June 2012 ,DipIFR)
    Note 8 – Long-term borrowings The long-term borrowings of Alpha arose on 1 April 2011 when Alpha borrowed €50 million. Alpha incurred issue costs of €1 million. The exchange rate at 1 April 2011 was $1·20 = €1. On 1 April 2011 Alpha included $60 million in long-term borrowings and charged $1·2 million to comprehensive income.

    The borrowing requires Alpha to make annual interest payments in arrears of €4 million. The exchange rate on 31 March 2012 was $1·25 = €1. Alpha therefore charged a finance cost of $5 million to comprehensive income on 31 March 2012.

    The loan is repayable by Alpha on 31 March 2016 at an amount of €58 million. The effective annual interest rate applicable to this loan is 11·1%. Other than as described in this note, Alpha has made no other accounting entries relating to this loan. You can ignore the deferred tax implications of any adjustments you make due to the information in this note.

    I have done it like this:
    Op. Bal Interest Paid Effective Interest @ 11.1% closing Bal
    49,000 € (4000 € ) 49,000×11.1%= 5439 € 50,439 €

    Translated into $
    58,800 $ (5000 $ ) 58,800x 11.1% = 6527 $ 50,439x 1.25= 63,049
    op. rate cl. rate cl. rate

    So, should we not charge $ 6,527 to P/L (and reduce from Cons. Ret Ears) and do the reversal of $ 5,000 which has been charged by Alpha.

    Reporting date is: 31 March 2012.

    • Profile photo of MikeLittle says

      Yes, all foreign denominated values at converted but, in the case of cash, I have visions of €32 in a cash box in the cashier’s office left over from a director’s visit to a European client. You wouldn’t bother converting that on the grounds of immateriality. In practice the cashier would, with permission, put £20 from their own funds and take the euros in readiness for their own foreign holiday next year.

      In fact, in practice, those euros wouldn’t even leave the director’s possession! They would be explained away as “incidental expenses where I was not able to get a receipt”! (coffee from a coffee machine or parking where the ticket machine ate your ticket whilst lifting the barrier for you to drive out from the car park)

      Translation of the currency is unrealised

      Please, in future, post questions like this on the Ask the Tutor page

  3. Profile photo of MikeLittle says

    The opening inventory is DEBITED to statement of profit or loss – whatever makes you think that it’s credited?

    The figure for the statement of financial position is the one on the debit side below the total lines

    Ok?

  4. Profile photo of fahim231 says

    hello sir – in relation to your inventory T account – is opening inventory credited to the income statement? and which figure of the account would you put in the balance sheet?

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