Question 1

SECTION A

Global Trade Corp, whose functional currency is the Dollar ($), sold goods to a foreign customer on 1 November 20X7 for 100,000 Euros (€). The customer paid the invoice on 15 January 20X8. Global Trade's year-end is 31 December 20X7.
Exchange rates:
1 Nov 20X7: $1 = €0.80
31 Dec 20X7: $1 = €0.85
15 Jan 20X8: $1 = €0.82

What is the exchange difference recognized in the Statement of Profit or Loss for the year ended 31 December 20X7?

Accepted Answer

Translate the receivable at the transaction date. Then retranslate at the year-end closing rate. The difference is the exchange gain or loss.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Multiplying by the exchange rate instead of dividing, or confusing a gain with a loss when the home currency strengthens.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FR — Financial Reporting Practice Exam 3

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