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Hiya,
Opentution has explained to calculate post acquisition profits as the balancing figure after converting assets and liab @ closing rate and sh. capital and pre acq @ HR rate .
But In Kaplan page no:457 (chapter-20) -Illustration 5 reserves , they have calculated post acquisition profits just by dividing with average rate ? please can you let know which one to follow?Thanks.
Either method is fine- for foreign exchange the important thing is to be able to calculate the exchange differences in OCI. Remember that in the new syllabus we are off generally asked to calculate goodwill and exchange differences in OCI if we are asked about foreign currency- we won’t be asked to produce a full statement of financial position. Most of the marks are awarded for the quality of explanation not for numbers.
Using the open tuition method the balancing figure is a combination of profits and exchange differences – it’s probably more practical for exam purposes – I would be very surprised if they ask you for an analysis of reserves in the statement of financial position
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