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As per Para. 48 of IAS 21:
“On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognised in other comprehensive income and accumulated in the separate component of equity, shall be reclassified from equity to profit or loss (as a reclassification adjustment) when the gain or loss on disposal is recognised …”
According to Para. 48, the exchange differences (with respect to the SFP) should be accumulated in OCE and not GRE. So regarding example 3, GRE should be $122m? And whatever the ‘exchange rate losses’ are, they should be recognised in OCI and accumulated in OCE.
Strictly speaking XD should be recognised in OCI and will normally be reported in a separate reserve in the CSFP.
On sale of the subsidiary, the balance on this reserve will be recycled in the profit and loss account.
Re example 3, I will change the question next year, since what I have proved is ‘group reserves’ rather than group RE.
To achieve perfection for RE you would need to strip out the XD on GW but also the cumulative XD on the retranslation of the net assets.
By the time you did that in the exam, everyone else would have finished and the cleaners would be in, preparing the exam hall for the next day. 🙂
Thanks for the feedback.
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