PAS 21 THE EFFECT OF CHANGES IN FOREIGN EXCHANGE RATES

1. Foreign operations that are an integral part of the operations of the entity would have the
same functional currency as the entity. Where a foreign operation functions independently from
the parent, the functional currency will be
a. That of the parent.
b. Determined using the guidance for determining an entity’s functional currency.
c. That of the country of incorporation
d. The same as the presentation currency.

2. Generally speaking, a gain or loss arising from (1) foreign currency transaction and (2) foreign
currency translation are reported in the
a. (1) Income statement (2)Income statement
b. (1) Income statement (2) Balance sheet
c. (1) Balance sheet (2) Income statement
d. (1) Balance sheet (2) Balance sheet

3.

ANSWER KEY:
1. B
2. B
3.