Question 1

**Section A**

On 1 October 20X6, EuroBuild Co (functional currency: Euros) took out a loan of $1,000,000 USD. The exchange rate on this date was €1 = $1.10. At the financial year-end on 31 December 20X6, the exchange rate was €1 = $1.05.

What is the foreign exchange gain or loss to be recognized in profit or loss for the year ended 31 December 20X6?

Accepted Answer

Translate the loan at the transaction date rate. Translate it again at the closing rate. The difference is the FX gain/loss. Remember, if you owe foreign currency and your home currency weakens, you make a loss.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Confusing gains and losses when exchange rates are quoted as foreign currency per unit of functional currency.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FR — Financial Reporting Practice Exam 4

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