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Hi
Hope somebody can help me I’m really struggling with when to use the big foreign calculation.
Some exam questions like Ribby, Hall and Zian do not calculate any exchange gain or loss on consolidation and do not seem to bother with it. But other questions in my Kaplan exam kit like Q7 Memo, it is taken to other comprehensive income and to retained earnings and the statement of financial position will not balance without it.What is the difference in these 2 questions, I keeping looking but I can’t find one.
Thanks in advance for anyone who can help.
quick example:
if a company purchase an asset cost $15m in 2010 let say when the exchange rate was £1= 1.50USD
so the cost in pound is $15/1.5 =£10m in 2010.the company sold the Asset in 2011 when the exchange rate is gone down £1=1.25USD. now the cost is $15/1.25 =£12m
calculate the Gain or loss on fixed asset.
will there be a gain or loss? let’s see
Sold for £12
les Bought for £10(£12- £10) = £2m its again on disposal fixed asset.therefore it goes to income statement (add to gross profit ). but if it was a loss we deduct it.
also adjustment have to be done to Retained earning (plus if its a gain) minus if its a loss.
Note: please it could be anything not just buying asset but it could be loan or other stock.
Sorry i have nott got the question but if the gain or loss is not done in Qs Ribby is because its not asking to do it. means there is no diffrent currency used within the group account.
hope it helps.
quick example:
if a company purchase an asset cost $15m in 2010 let say when the exchange rate was £1= 1.50USD
so the cost in pound is $15/1.5 =£10m in 2010.the company sold the Asset in 2011 when the exchange rate is gone down £1=1.25USD. now the cost is $15/1.25 =£12m
calculate the Gain or loss on fixed asset.
will there be a gain or loss? let’s see
Sold for £12
les Bought for £10(£12- £10) = £2m its again on disposal fixed asset.therefore it goes to income statement (add to gross profit ). but if it was a loss we deduct it.
also adjustment have to be done to Retained earning (plus if its a gain) minus if its a loss.
Note: please it could be anything not just buying asset but it could be loan or other stock.
Sorry i have nott got the question but if the gain or loss is not done in Qs Ribby is because its not asking to do it. means there is no diffrent currency used within the group account.
hope it helps.
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