Question 1

**Section A**

TradeGlobal, whose functional currency is the Dollar ($), purchased goods from a foreign supplier on 1 November 20X5 for 150,000 Euros (€). The invoice remains unpaid at the year-end on 31 December 20X5. 
Exchange rates:
1 Nov 20X5: $1 = €1.20
31 Dec 20X5: $1 = €1.25
Average rate for year: $1 = €1.22

What is the exchange difference to be recognized in the Statement of Profit or Loss for the year ended 31 December 20X5?

Accepted Answer

1. Translate the initial transaction at the spot rate on the date of the transaction. 2. Retranslate the outstanding payable at the year-end closing rate. 3. The difference is the exchange gain or loss.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Dividing instead of multiplying (or vice versa) depending on how the rate is quoted, or confusing a gain with a loss.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FR — Financial Reporting Practice Exam 5

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