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ACCA Strategic Professional · Strategic Business Reporting (International) · Group accounting including statements of cash flows

Gorse (functional and presentation currency: dollars) owns 75% of Heath, whose functional currency is the peso (P). Heath's opening net assets were P8,000, profit for the year P2,000 (earned evenly), with no dividends. Rates: opening P4 = $1; average P4.4 = $1; closing P5 = $1. Ignoring goodwill, what is the total exchange difference on retranslation of Heath's net assets for the year, before allocation to the non-controlling interest?

The question's keyed answer is not supported by the working, so this item should not be used.

  1. A$100 loss
  2. B$91 lossCorrect
  3. C$200 gain
  4. D$55 loss

Explanation

Opening net assets P8,000 / 4 = $2,000. Profit P2,000 / 4.4 = $454.55. Closing net assets P10,000 / 5 = $2,000. Exchange difference = 2,000 − (2,000 + 454.55) = $454.55 loss, which is not among the options, so check: closing equals 2,000, hence the loss is 454.55. Correct recalculation: opening P8,000 at 4 = $2,000; profit at 4.4 = $454.55; total $2,454.55; closing P10,000 at 5 = $2,000; loss = $454.55.

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