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in question Ribby ,hall and zian(foreign subsi)
Zian has financed part of it’s operation through $4 million loan from hall which was raised on 1july2007 .This is included in the financial assets of hall and non current liabilty of zian.
1june 2007 11 dinar to 1$
31 july 2008 12 dinar to 1$
Solution : exchange loss of 8 will be recorded but i dont understand where should i record this in Retained earning?
In the answer it is deducted net asset at year end.One more question in the answer of june 2009 ribby hall and zian
post acqusition reserve are translated through balencing figure of share capital+pre acquisition reserve + Fv adjustment -net asset at yr end.
But in question june 2011 ROSE post acqusition reserves were translated by dividing average year xchange rate .
i am confused which is the right way?In answer to your first post, the exchange loss of 8 is shown as a deduction from the net assets / retained earnings of Zian. That affects the figure for post-acquisition retained which itself is then used to calculate the consolidated retained earnings for the group
In answer to your second post, this is a difference between the Kaplan method of translating the pre-acquisition figures at historic rate and the closing position at current rate. The “missing” figure is then the balancing figure as translated at …. balancing figure.
I’m pretty sure I’m correct in saying that, if you were to tackle the question by translating ALL the closing balance sheet at closing rate, you would arrive at an exchange difference that then works its way through to being the exchange difference to be shown in Statement of Changes in Equity.
That’s certainly the way I would tackle the issue
I still have a question regarding this intercompany loan.
Zian received a loan from parent $4mln on 1 June 2007 (ex rate 10dinars/$1), that is 40 dinars received.
Reporting date 31 May 2008 (ex rate 12dinars/$1)
from the draft SOFP of Zian I see 48 dinars of Non-current liabilities.
In the answers they make an adjustment:
Dr Non curr liabilities 8
Cr R/E 8What I assumed that the company made an adjustment already because Non-current liabilities are 48 dinars, that are at the closing rate of 12 constitute that loan of $4mln. Why do they make that adjustment?
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