CMA Intermediate · Financial Accounting · The Effects of Changes in Foreign Exchange Rates (AS 11)
As per AS 11, what is an 'exchange rate'?
Under AS 11, an exchange rate is the ratio for exchange of two currencies. It is a general term. Closing rate, forward rate and average rate are specific kinds of exchange rate used in particular situations, so none of them defines the term itself.
- AThe ratio for exchange of two currenciesCorrect
- BThe rate prevailing on the balance sheet date only
- CThe rate at which a forward contract is entered into
- DThe average of opening and closing rates for the period
Explanation
AS 11 defines exchange rate simply as the ratio for exchange of two currencies. The closing rate, the forward rate and the average rate are specific rates, not the general definition.
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