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Chapter 13 – Foreign Currency Transactions

Forums › Ask CIMA Tutor Forums › Ask CIMA F2 Tutor Forums › Chapter 13 – Foreign Currency Transactions

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by P2-D2.
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  • November 5, 2016 at 10:53 am #347565
    andrewd
    Participant
    • Topics: 3
    • Replies: 4
    • ☆

    Hi Chris,
    I’m confused by the example in the notes… P.60-62. It’s another one that doesn’t appear to have the breakdown on the video, so had to work it out. When calculating the Group Retained Earnings, I understand we translate the subsidiary post-acq RE to presentational currency, and add it to the parent RE (already in presentational currency) and include any profit/loss on exchange. However, the answer on P.133 shows 80% x 130, of which 130 is still in foreign currency rate (according to W2)? So the 100% Parent RE is in $ but the 80% Sub RE is in Dinar? The total of 190.7 is showing in the CSCI answer, and it does seem to balance, but I can’t understand how the two different currencies can be added together?

    November 17, 2016 at 9:53 pm #349680
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6493
    • ☆☆☆☆☆

    Hi,

    Sorry for being slow in getting back to you. Another good spot.

    I’ve had a look at the answer in the back. In (W5) you’re correct in that the post-acquisition retained earnings from (W2) need to be translated at the closing rate to give 24.2 and total group retained earnings of 110.9.

    The resaon ther group SFP still balances even though there is an error in (W5) is because there is a different mistake on the non-current liabilities line. This should total 95.1 and will make it all balance having corrected the error you spotted.

    I was always told that two wrongs don’t make a right but here it seems to have done so purely by luck.

    I’ll get the answers updated.

    Keep up the hard work.

    Thanks

    Chris

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