Foreign Currency Translation

On 1 July 2020 Ventura Pty Ltd, an Australian company, acquires all of the issued shares in Newcastle Plc, a company incorporated in England. The relevant exchange rates for the year ending 30 June 2021 are as follows:

01 July 2020	1.00 = A$2.00
Average rate for the year	1.00 = A$2.10
Ending inventory acquired (before year end)	1.00 = A$2.15
30 June 2021	1.00 = A$2.20

The statement of profit or loss and other comprehensive income and statement of financial position for the Newcastle Plc are shown below. The accounts are stated in UK.

The statement of profit or loss and other comprehensive income for Newcastle Plc for the year ending 30 June 2021:

	UK
Sales	55,000
Cost of sales
Inventory1 July 2020	(10,000)
Purchases	(40,000)
Inventory30 June 2021	6,500
Administration expense	(2,000)
Depreciation expense	(3,000)
Profit before tax	6,500
Income tax expense	(3,000)
Profit after tax	3,500

The statement of Financial Position for Newcastle Plc as at 30 June 2021

	1 July 2020	30 June 2021
	UK	UK
Share capital	15,000	15,000
Retained earnings	3,500	3,500
Bank loan	4,500	8,000
Accounts payable	2,500	3,500
	25,500	30,000
Plant and equipment	15,500	12,500
Cash and debtors	4,000	11,000
Inventory	6,000	6,500
	25,500	30,000

Required:

Translate the financial statements of the foreign operation, assuming that the Australian dollar is the presentation currency of the group.

In this part of the question, you need to translate the financial statements from the local currency (UK pounds) into the presentation currency of Ventura Pty Ltd in Australia (in Australian dollars).

Interpret how this translation from the local currency (UK pounds) into the presentation currency of Ventura Pty Ltd in Australia helps Ventura Pty Ltd its presentation of consolidated financial statements.