FRS121- The Effect of Changes in Foreign Exchange Rates

On 1 January 2009, Baby Enterprise Sdn Bhd (BESB) a company that operates principally in Malaysia acquired all the issued share capital of William Global Ptd. Ltd (WGPL) in Australia for AUD$3,150,000. The foreign subsidiary is independent of the parent from Malaysia. The Financial Statements for the year ended 31 December 2009 of WGPL is as follows:

Statement of Comprehensive Income for the year ended 31 December 2009

	AUD$000	AUD$000
Sales Revenue		5,000
Purchases	2,000
Closing Inventory	(500)	(1,500)
Gross Profit		3,500
Depreciation	100
Admin Costs	1,400
Rental	100	(1,600)
Net Profit		1,900

Statement of Financial Positions as at 31 December 2009
	AUD$000	AUD$000
Property, Plant and Equipment (PPE)	4,900
Accumulated Depreciation	(800)	4,100
Current Assets
Inventory	400
Bank	900
Accounts Receivable	200	1,500
		5,600
Liabilities
Accounts Payable	200
Loans	500	700
Equity
Ordinary Shares of $1 each	2,000
Retained profit carry forward	1,000
P&L balance	1,900	4,900
		5,600

The exchange rates are as follows:

Date when PPE were acquired by WGPL AUD$1: RM2.80

1 January 2009 AUD$1: RM2.90

31 December 2009 AUD$1: RM2.70

Average rate for 2009 AUD$1: RM2.80

Closing Stocks were bought at AUD$1: RM2.90

You are required to:

a). Determine the functional currency of WGPL.

b). Translate the Statement of Comprehensive Income into functional currency of the parent.

c) Translate the Statement of Financial Positions into the functional currency of the parent.

d) Calculate the amount of goodwill that will be shown in Consolidated Financial Statement of the group.