Subject: Advanced corporate reporting

Topic: MFRS 121 Foreign Currency

Question 6 Concerned ple is a company whose functional currency is sterling (f) and has a financial year- end of 31 December. Concerned ple imports goods from Africa and the contracts are dominated in the local currency - the Kwacha (KW). 1 December Import of goods on credit KW400,000 15 December Cash payment to supplier KW400,000 31 December Reporting date - all goods remain unsold The relevant exchange rates are as follows 1 December KW10 :E1 15 December KW8 f1 31 December KW9 Required a) Explain and show how the two foreign currency transactions are translated. Transactions is a foreign currency to be translated into functional currency at the exchange rate (spot rate) on the date of the transaction. The exchange difference arising on the settlement date and on the translation of monetary balances are recognised in the statement of PL. b) Calculate the exchange difference arising on the settlement of the liability and state how the exchange difference is accounted for. c) Explain how the unsold inventory would be presented in the statement of financial position at the reporting date of 31 December