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Hello.
I’m not clear with translation rates of the foreign currency.
As far I know,
use historic rate (the spot rate) for the initial transactions;
use historic rate at the date of settlement for the settled transactions;
use closing rate (rate at the reporting date) for the monetary item (Unsettled transaction);
use the rate that existed at the date of initial transaction for the non-monetary item (Unsettled transaction).None of the above mentioned about ‘an average rate for the year’
But from ‘Specimen Exam applicable from Sept. 2016, question no.6’, indicated that
‘An average for the year, provided there have been no significant fluctuations throughout the year’ may be used to translate the foreign currency purchases and sales.Would you please explain me about those further and give me some other examples if possible?
Thank you.
You’re correct all the way down
The average rate is simply to assist financial personnel from having records of transactions involving potentially 250 different rates of exchange (52 weeks, 5 days per week (less 2 weeks annual holiday!))
What you have written down is most likely all you’ll need apart from knowing what is meant by the expressions ‘functional currency’ and ‘reporting currency’
It’s expedient to use an average. That’s all
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