ACCA SBR · Guided practice (Show me how)
Chapter 6: Foreign currency (IAS 21)
Translating a foreign subsidiary and its exchange differences
Chapter 6, Examples 3 and 4. Statements of profit or loss for the year ended 31 December 2015:
| Year ended 31 December 2015 | Holly $m | Ivy Dinars m |
|---|---|---|
| Revenue | 247 | 1,664 |
| Cost of sales | (181) | (1,288) |
| Gross profit | 66 | 376 |
| Expenses | (29) | (156) |
| Profit before interest and tax | 37 | 220 |
| Finance costs | (8) | (40) |
| Profit before tax | 31 | 180 |
| Taxation | (5) | (50) |
| Profit for the year | 26 | 130 |
Statements of financial position at 31 December 2015:
| At 31 December 2015 | Holly $m | Ivy Dinars m |
|---|---|---|
| Non-current assets | 200 | 500 |
| Investment in Ivy | 200 | - |
| Current assets | 90 | 390 |
| Total assets | 490 | 890 |
| Share capital | 250 | 350 |
| Retained earnings | 110 | 280 |
| Non-current liabilities | 80 | 65 |
| Current liabilities | 50 | 195 |
| Total equity and liabilities | 490 | 890 |
On 1 January 2015, Holly acquired 80% of the equity share capital of Ivy for a consideration of Dinars 760 million when the retained earnings were Dinars 150 million. The non-controlling interest is valued using the proportionate share of net assets method. The following exchange rates are relevant:
| Dinars to $ | |
|---|---|
| 1 January 2015 | 3.8 |
| 31 December 2015 | 4.3 |
| Average rate for the year to 31 December 2015 | 4.0 |
The notes translate each line to one decimal place of $m. All $ figures are in $m.
(i) Goodwill
Calculate the goodwill for inclusion in the group statement of financial position of the Holly Group at 31 December 2015, and the exchange loss on it.
(ii) Post-acquisition reserves
Calculate the post-acquisition reserves of Ivy for inclusion in the group statement of financial position at 31 December 2015.
(iii) Non-controlling interests
Calculate the non-controlling interests for inclusion in the group statement of financial position of the Holly Group at 31 December 2015.
(iv) Group reserves
Calculate the group reserves for inclusion in the group statement of financial position of the Holly Group at 31 December 2015.
Example 4: the translation loss
Calculate the gain or loss on translation of the overseas subsidiary for the year ended 31 December 2015.
Opening this exercise…