Objective Type IAS 21

QUESTIONS
01. On 19 December 2019 Star Limited bought goods from Morgan plc for 80,000 British Pounds.
At the date of the transactions, the exchange rates were: £1 = PKR 186
On 31 December 2019, Star Limited’s financial year end, the equivalent rates were: £1 = PKR
182 Page | 1
The average rate for the year ended 31 December 2019 was £1 = PKR 185
Star Limited paid this creditor on 3 February 2020 when the exchange rates were: £1 = PKR
188
Star Limited should recognise purchases on 19 December 2019 at:

(a) Rs. 14,880,000

(b) Rs. 14,560,000

(c) Rs. 14,800,000

(d) Rs. 15,040,000

02. On 19 December 2019 Star Limited bought goods from Morgan plc for 80,000 British Pounds.
At the date of the transactions, the exchange rates were: £1 = PKR 186
On 31 December 2019, Star Limited’s financial year end, the equivalent rates were: £1 = PKR
182
The average rate for the year ended 31 December 2019 was £1 = PKR 185
Star Limited paid this creditor on 3 February 2020 when the exchange rates were: £1 = PKR
188
The carrying amount of trade payables in respect of above on 31 December 2019 shall be:

(a) Rs. 14,880,000

(b) Rs. 14,560,000

(c) Rs. 14,800,000

(d) Rs. 15,040,000

03. On 19 December 2019 Star Limited bought goods from Morgan plc for 80,000 British Pounds.
At the date of the transactions, the exchange rates were: £1 = PKR 186
On 31 December 2019, Star Limited’s financial year end, the equivalent rates were: £1 = PKR
182
The average rate for the year ended 31 December 2019 was £1 = PKR 185
Star Limited paid this creditor on 3 February 2020 when the exchange rates were: £1 = PKR
188
The amount of exchange gain or loss for the year ended 31 December 2019 shall be:

(a) Rs. 320,000 gain

(b) Rs. 320,000 loss

(c) Rs. 480,000 gain

(d) Rs. 480,000 loss

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 Objective Type IAS 21

04. On 19 December 2019 Star Limited bought goods from Morgan plc for 80,000 British Pounds.
At the date of the transactions, the exchange rates were: £1 = PKR 186
On 31 December 2019, Star Limited’s financial year end, the equivalent rates were: £1 = PKR
182
Page | 2
The average rate for the year ended 31 December 2019 was £1 = PKR 185
Star Limited paid this creditor on 3 February 2020 when the exchange rates were: £1 = PKR
188
The amount of exchange gain or loss to be recognised on 03 February 2020 shall be:

(a) Rs. 320,000 gain

(b) Rs. 320,000 loss

(c) Rs. 480,000 gain

(d) Rs. 480,000 loss

05. Which of the following statements are correct?

(i) An entity can have only one presentation currency
(ii) Functional currency is the currency of primary economic environment in which an entity
operates
(iii) Any currency other than functional currency of the entity is foreign currency.

(a) (i) and (ii)

(b) (i) and (iii)

(c) (ii) and (iii)

(d) (i), (ii) and (iii)

06. Which of the following is NOT a primary indicator for determining functional currency of an
entity?

(a) The currency that mainly influences sales prices for goods and services

(b) The currency of the country whose competitive forces and regulations mainly determine
the sales prices of its goods and services

(c) The currency in which funds from financing activities (raising loans and issuing equity)
are generated

(d) The currency that mainly influences labour, material and other costs

07. Which of the following is NOT a monetary item?

(a) Cash at bank (Fixed deposit in Pakistani Rupees)

(b) Investment equity instruments of other companies

(c) Trade receivables

(d) Loan payable

 Objective Type IAS 21

08. On 19 December 2019 Star Limited sold goods to Clinton Inc for US$ 20,000. At the date of the
transactions, the exchange rates were $1 = PKR 148
On 31 December 2019, Star Limited’s financial year end, the equivalent rates were $1 = PKR
149
Star Limited received the amount due on 3 February 2020 when the exchange rates were $1 =
Page | 3
PKR 146
Star Limited should record revenue on 19 December 2019 at:

(a) Rs. 2,960,000

(b) Rs. 2,980,000

(c) Rs. 2,920,000

(d) None of above

09. On 19 December 2019 Star Limited sold goods to Clinton Inc for US$ 20,000. At the date of the
transactions, the exchange rates were $1 = PKR 148
On 31 December 2019, Star Limited’s financial year end, the equivalent rates were $1 = PKR
149
Star Limited received the amount due on 3 February 2020 when the exchange rates were $1 =
PKR 146
The receivables on 31 December 2019 shall be presented at:

(a) Rs. 2,960,000

(b) Rs. 2,980,000

(c) Rs. 2,920,000

(d) None of above

10. On 19 December 2019 Star Limited sold goods to Clinton Inc for US$ 20,000. At the date of the
transactions, the exchange rates were $1 = PKR 148
On 31 December 2019, Star Limited’s financial year end, the equivalent rates were $1 = PKR
149
Star Limited received the amount due on 3 February 2020 when the exchange rates were $1 =
PKR 146
The amount of exchange gain or loss for the year ended 31 December 2019 in respect of
above transaction is:

(a) Rs. 20,000 gain

(b) Rs. 20,000 loss

(c) Rs. 40,000 gain

(d) Rs. 60,000 gain

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 Objective Type IAS 21

11. On 19 December 2019 Star Limited sold goods to Clinton Inc for US$ 20,000. At the date of the
transactions, the exchange rates were $1 = PKR 148
On 31 December 2019, Star Limited’s financial year end, the equivalent rates were $1 = PKR
149. Star Limited received the amount due on 3 February 2020 when the exchange rates were
$1 = PKR 146

Page | 4 The amount of exchange gain or loss on receipt of cash on 03 February 2020 is:

(a) Rs. Nil

(b) Rs. 60,000 gain
(c) Rs. 40,000 loss
(d) Rs. 60,000 loss

12. Moon Limited functional currency is Pak Rupees. It bought a property in New York for $5
million on 2 July 2019. The 25% amount was paid immediately and remaining is to be paid on
31 October 2019.
Moon Limited financial year ends on 30 September each year. Relevant exchange rates are:

02 July 2019 $1 = PKR 164

30 September 2019 $1 = PKR 158
31 October 2019 $1 = PKR 156
The fair value of property is $5.1 million on 30 September 2019.
The property is being used for administrative purposes and has a useful life of 50 years. Moon
Limited uses revaluation model.
At which amount the above property shall be presented in statement of financial position on 30
September 2019?

(a) Rs. 820.0 million

(b) Rs. 815.9 million
(c) Rs. 805.8 million
(d) Rs. 790.0 million

13. Moon Limited functional currency is Pak Rupees. It bought a property in New York for $5
million on 2 July 2019. The 25% amount was paid immediately and remaining is to be paid on
31 October 2019.
Moon Limited financial year ends on 30 September each year.
Relevant exchange rates are:

02 July 2019 $1 = PKR 164

30 September 2019 $1 = PKR 168
31 October 2019 $1 = PKR 166
The fair value of property is $5.1 million on 30 September 2019.
The property is being used for administrative purposes and has a useful life of 50 years. Moon
Limited uses revaluation model.
What is the total charge/credit (net) in profit or loss in respect of the above for the year ended
30 September 2019?

(a) Rs, 4.1 million expense

(b) Rs. 19.1 million expense
(c) Rs, 15 million expense
(d) Rs. 5 million credit
 Objective Type IAS 21

14. Earth Limited has overseas freehold land which it bought for $2 million on 1 March 2019. It
uses revaluation model under IAS 16 for this property. The fair value of land is $2.5 million on
31 December 2019 (year-end). Relevant exchange rates are:

01 March 2019 $1 = PKR 144

31 December 2019 $1 = PKR 165
Page | 5
Which of the following is correct for its financial statements for the year ended 31 December
2019?

(a) PPE Rs.412.5 million, Revaluation surplus Rs. 82 million, Profit or loss Rs. 42.5 million
(b) PPE Rs. 288 million, Revaluation surplus Rs. 82 million, Profit or loss Rs. 42.5 million
(c) PPE Rs. 412.5 million, Revaluation surplus Rs. 124.5 million, Profit or loss Rs. Nil
(d) PPE Rs.288 million, Revaluation surplus Rs. 124.5 million, Profit or loss Rs. Nil

15. Which TWO of the following are secondary indicator for determining functional currency?

(a) The currency in which funds from financing activities (raising loans and issuing equity)
are generated
(b) The currency of the country in which the entity is registered
(c) The currency in which receipts from operating activities are usually retained
(d) The currency that mainly influences labour, material and other costs

16. Moon Limited functional currency is Pak Rupees. It bought a property in New York for $5
million on 2 July 2019. The 25% amount was paid immediately and remaining is to be paid on
31 October 2019. Moon Limited financial year ends on 30 September each year. Relevant
exchange rates are:

02 July 2019 $1 = PKR 164

30 September 2019 $1 = PKR 158
31 October 2019 $1 = PKR 156
The fair value of property is $5.1 million on 30 September 2019.
The property is being used for administrative purposes and has a useful life of 50 years. Moon
Limited uses cost model.
At which amount the above property shall be presented in statement of financial position on 30
September 2019?

Rs. __________ million

17. Moon Limited functional currency is Pak Rupees. It bought a property in New York for $5
million on 2 July 2019. The 25% amount was paid immediately and remaining is to be paid on
31 October 2019. Moon Limited financial year ends on 30 September each year. Relevant
exchange rates are:

02 July 2019 $1 = PKR 164

30 September 2019 $1 = PKR 158
31 October 2019 $1 = PKR 156
The fair value of property is $5.1 million on 30 September 2019.
The property is being used for administrative purposes and has a useful life of 50 years. Moon
Limited uses cost model. At which amount the payables for property shall be presented in
statement of financial position on 30 September 2019?

Rs. ___________ million

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 Objective Type IAS 21

18. Moon Limited functional currency is Pak Rupees. It bought a property in New York for $5
million on 2 July 2019. The 25% amount was paid immediately and remaining is to be paid on
31 October 2019. Moon Limited financial year ends on 30 September each year.
Relevant exchange rates are:
Page | 6 02 July 2019 $1 = PKR 164
30 September 2019 $1 = PKR 158
31 October 2019 $1 = PKR 156
The fair value of property is $5.1 million on 30 September 2019.
The property is being used for administrative purposes and has a useful life of 50 years. Moon
Limited uses cost model.
What is the total charge/credit (net) in statement of profit or loss in respect of the above for the
year ended 30 September 2019?

Rs. ___________ million

19. Moon Limited functional currency is Pak Rupees. It bought a property in New York for $5
million on 2 July 2019. The 25% amount was paid immediately and remaining is to be paid on
31 October 2019. Moon Limited financial year ends on 30 September each year.
Relevant exchange rates are:

02 July 2019 $1 = PKR 164

30 September 2019 $1 = PKR 158
31 October 2019 $1 = PKR 156

The fair value of property is $5.1 million on 30 September 2019.

The property being vacant is held for capital appreciation and has a useful life of 50 years.
Moon Limited uses fair value, where permitted under relevant IFRSs.
At which amount the above property shall be presented in statement of financial position on 30
September 2019?

Rs. ___________ million

20. Moon Limited functional currency is Pak Rupees. It bought a property in New York for $5
million on 2 July 2019. The 25% amount was paid immediately and remaining is to be paid on
31 October 2019. Moon Limited financial year ends on 30 September each year.
Relevant exchange rates are:

02 July 2019 $1 = PKR 164

30 September 2019 $1 = PKR 158
31 October 2019 $1 = PKR 156
The fair value of property is $5.1 million on 30 September 2019.
The property being vacant is held for capital appreciation and has a useful life of 50 years.
Moon Limited uses fair value, where permitted under relevant IFRSs.
What is the total charge/credit (net) in statement of profit or loss in respect of the above for the
year ended 30 September 2019?

Rs. ___________ million

 Objective Type IAS 21

ANSWERS
01. (a) £80,000 x 186 = Rs. 14,880,000
The exchange rate at the date of transaction is applied.
02. (b) £80,000 x 182 = Rs. 14,560,000
The closing exchange rate is applied for monetary items. Page | 7

03. (a) Initially recorded at £80,000 x 186 = Rs. 14,880,000

Retranslated at £80,000 x 182 = Rs. 14,560,000
Difference (decrease in liability is gain) = Rs. 320,000
04. (d) 0n 31 December 2019 £80,000 x 182 = Rs. 14,560,000
Payment £80,000 x 188 = Rs. 15,040,000
Difference (more payment means loss) = Rs. 480,000
05. (c) Statement (i) is incorrect, an entity may have more than one presentation
currencies, in which they present their financial statements.
06. (c) This is one of the secondary indicators.
07. (b) Investment in other companies is non-monetary item as it may not be
realised in fixed number of currency units.
08. (a) $20,000 x 148 = Rs. 2,960,000
The exchange rate at the date of transaction is applied.
09. (b) $20,000 x 149 = Rs. 2,980,000
The closing exchange rate is applied for monetary items.
10. (a) Initially recorded at $20,000 x 148 = Rs. 2,960,000
Retranslated at $20,000 x 149 = Rs. 2,980,000
Difference (increase in asset is gain) = Rs. 20,000
11. (d) 0n 31 December 2019 $20,000 x 149 = Rs. 2,980,000
Received $20,000 x 146 = Rs. 2,920,000
Difference (less received means loss) = Rs. 60,000
12. (c) $5.1 million x 158 = Rs. 805.8 million
Revalued at year end.
13. (b) Depreciation Rs. 820 million / 50 years x 3/12 = Rs. 4.1 million
The exchange gain shall be recognised in other comprehensive income as
revaluation gain is also recognised in other comprehensive income.
Exchange loss on payables
$5 million x 75% x Rs. (164-168) = Rs. 15 million
Net Rs. 19.1 million
14. (c) PPE $2.5 million x 165 = Rs. 412.5 million
Gain on revaluation (including exchange gain)
= $412.5 million – ($2 million x 144) = Rs. 124.5 million
Profit or loss Rs. Nil (because no deprecation on land and exchange gain
is to be recognised in other comprehensive income)
15. (a) and (c) (b) is not an indictor
(d) is primary indicator

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 Objective Type IAS 21

16. Rs. 815.9 million $5 million x 164 = Rs. 820 million

Depreciation Rs. 820 million / 50 years x 3/12 = Rs. 4.1 million
Carrying amount Rs. 815.9 million
17. Rs. 592.5 million $5 million x 75% x Rs. 158 = Rs. 592.5 million
Using closing rate
Page | 8
18. Rs. 18.4 million Depreciation Rs. 820 million / 50 years x 3/12 = Rs. 4.1 million
Exchange gain $5 million x 75% x Rs. (164-158) = Rs. 22.5 million
Net Rs. 18.4 million
19. Rs. 805.8 million $5.1 million x 158 = Rs. 805.8 million
Investment property under fair value model (no depreciation is charged).

20. Rs. 8.3 million Initial recognition $5 million x 164 = Rs. 820 million
At year end $5.1 million x 158 = Rs. 805.8 million
Decrease in value Rs. 14.2 million
Investment property under fair value model (no depreciation is charged).
Exchange gain on payables
$5 million x 75% x Rs. (164-158) = Rs. 22.5 million
Net Rs. 8.3 million