MFRS 121 – Foreign Currency Examples

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MFRS 121 – Foreign Currency Examples

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MFRS 121 – Foreign Currency Examples

The above journal can be combined

1 June 20x2 DR Foreign Payable RM 69,000

DR Loss on exchange 3000
Cr Bank RM 72,000

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MFRS 121 – Foreign Currency Examples

31 Aug DR Bank RM 367,000

CR Foreign Loan RM 367,000

31 Dec DR Foreign Loan RM 11,000

CR Unrealised Gain on exchange RM 11,000

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MFRS 121 – Foreign Currency Examples

1.355

no need to put bracket

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MFRS 121 – Foreign Currency Examples

Example 3

Big Abe, whose functional currency is Ringgit Malaysia, bought a property in India for Rs 10 million on
1 January x2. On 31 December x4, the fair value of the property was Rs 12 million. Big Abe wants to
incorporate the fair value for the property. ignore deprecation.

The rates of exchange were:

1.1.2 RM1 :Rs 10
31.12.x4 RM1:Rs 12.5
Required:

How should the property be measured on 31 December x4.

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MFRS 121 – Foreign Currency Examples

Answer:

On 1 January x2, the property would be measured at RM1 million being Rs 10 million/10. On 31
December x4, the fair value had changed showing a surplus of Rs 2 million which should be credited
to the revaluation reserve it the functional currency is rupees.

However, as the functional currency is Ringgit Malaysia, the fair value has to be denominated in
Ringgit Malaysia and then compared with the carrying9 amount. The fair value will be Rs 12
million/12.5 = RM960,000. Instead of a surplus on revaluation, there is a deficit of RM40.000.

The property has to be disclosed at RM960,000.

Example 4

Small Abe, whose functional currency is Ringgit Malaysia, bought a property in Thailand for 100
million baht on 1 January x2. On 31 December x4, the fairvalue of the property was 110 million baht.
Small Abe wants to incorporate the fair value for the property. lgnore depreciation.

The rates of exchange were:

1.1.x2 RM1:10 baht

31.12.x4 RM1:8 baht

Required:

How should the property be measured on 31.12.x4?

Answer

On 1 January x2, the property would be measured at RM10 million being 100 million baht/10. On 31
December x4, the fair value has changed showing a surplus or 10 million baht which should be
credited to the revaluation reserve if the functional currency was baht.

However, as the functional currency is Ringgit Malaysia, the fair value has to be denominated in
Ringgit Malaysia and then compared with the amount. The fair carrying value will be 110 million
baht/8 =R M13.75 million. This surplus of HM3.75 is recognised in other comprehensive income and
disclosed in revaluation reserve.

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MFRS 121 – Foreign Currency Examples

Example 5

On 1 December xs, Stranger acquired goods for S20.000 for resale As at the reporting date ot 31
December x3. the net realisable value was S23.000. The functional currency of Stranger is Ringgit
Malaysia. The exchange rates between Ringgit Malaysia and S are as follows:

The rates of exchange were

1.12.x3 RM1: $6

31.12.x3 RM1: S5

Required:

What is the carrying amount of the inventory in the functional currency as at 31 December x3?

Answer

if the foreign currency the lower of cost and net realisable value of the goods will be $20.000. To
determine the carrying amount in the functional currency the translated amounts of cost and net
realisable value in Ringgit Malaysia will be compared.

The cost is translated at the exchange rate ruing on 1 December and the net realisable value at 31
December x3. Cost will be RM1 20.000 and the net realisable value will be RM115.000. The carrying
amount will be the net realisable value of RM115.000

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