Firewall AG is a German listed company that sells video games with the Euro () as its functional currency. On 1st January 2018, the company bought a new subsidiary, Siege Ltd, a company incorporated in United Kingdom (UK) with retained earnings of 4,500,000. Siege acts as the sales agency to Firewall AG in UK, which mainly involves selling video games exported by Firewall AG. All proceeds are remitted immediately to Firewall AG. All transactions between the parent company and its subsidiary are in Euro (). Siege's post-acquisition Statement of Comprehensive Income and Statement of Financial Position stated in Great Britain Pounds () are as follows: Statement of Comprehensive Income for the year ended 31st December 2018 000 000 60,000 Revenue Cost of sales: Opening inventory Purchases Closing inventory Gross profit Administrative expenses Depreciation Operating profit Finance costs Profit before tax Income tax expense Profit for the year 12,500 20,000 (8,000) 12,000 4,500 (24,500) 35,500 (16,500) 19,000 (3,000) 16,000 (3,200) 12,800 Statement of Financial Position as at 31st December 2018 ASSETS Non-current assets Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets LIABILITIES Current liabilities Trade and other payables Net assets EQUITY Share capital Retained earnings Total equity 000 12,000 1st January 2018 31st December 2018 Average rate for 2018 8,000 9,500 5,900 35,400 3,200 32,200 22,000 10,200 32,200 Additional information: 1. All non-current assets were purchased at the time of incorporation. Siege has not made any new non-current asset acquisitions since it was acquired by Firewall. 2. The relevant exchange rates are: 1 = 0.75 1 = 0.90 1 = 0.80 Required: (a) Translate Siege's financial statements for the year ended 31st December 2018 into the functional currency of Firewall AG in accordance with relevant accounting standards and practice. [Clearly state any assumptions you make.] (18 Marks) (b) Discuss the impact of the Great Britain Pound fluctuations in 2018 on Firewall AG's investment in Siege and comment on what factors Firewall AG should consider for making an investment. (7 Marks) [TOTAL: 25 MARKS]