Manufacturing equipment with a useful life of 10 years was purchased from a U.S. supplier for US$200,000 in November. At the time, the exchange rate in effect was US$1 = C$1.22 and the equipment and associated payable were recorded at $244,000. At year end, the payable was still outstanding and both it and the equipment were still recorded at $244,000. The year-end exchange rate was US$1 = C$1.32. Misty is not sure if either the initial or year-end amounts were recorded correctly, but she would like to get a better understanding of how to account for this transaction, as she expects OTE will engage in more transactions with U.S. suppliers in the future.

Question: What is the key issue for this scenario? Explain under IFRS.

Answer rating: 100% (QA)

Solution The key issue in this scenario is the proper accounting treatment of the manufacturing equipment purchase transaction under International Fin... View the full answer