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CMA Intermediate · Financial Accounting · The Effects of Changes in Foreign Exchange Rates (AS 11)

As per AS 11, the 'net investment in a non-integral foreign operation' of the reporting enterprise is:

Net investment in a non-integral foreign operation is the reporting enterprise's share in the net assets of that operation. It is a measure of net assets, meaning assets less liabilities, not just fixed assets, loans given or the current year's profit.

  1. AThe reporting enterprise's share in the net assets of that operationCorrect
  2. BThe total fixed assets of the foreign operation at the closing rate
  3. CThe total loans advanced by the reporting enterprise to the foreign operation
  4. DThe foreign operation's profit for the year translated at the average rate

Explanation

AS 11 defines net investment in a non-integral foreign operation as the reporting enterprise's share in the net assets of that operation. Net assets means assets less liabilities, so fixed assets alone, loans alone or the profit for the year do not represent it.

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