he following information relates to Questions 2533 Adrienne Yu is an analyst with an international bank. She analyzes Ambleu S.A. (Ambleu), a multinational corporation, for a client presentation. Ambleu complies with IFRS, and its presentation currency is the Norvoltian krone (NVK). Ambleus two subsidiaries, Ngcorp and Cendar, have different functional currencies: Ngcorp uses the Bindiar franc (B) and Cendar uses the Crenland guinea (CRG). Yu first analyzes the following three transactions to assess foreign currency transaction exposure: Transaction 1: Cendar sells goods to a non-domestic customer that pays in dollars on the purchase date. Transaction 2: Ngcorp obtains a loan in Bindiar francs on June 1, 2016 from a European bank with the Norvoltian krone as its presentation currency. Transaction 3: Ambleu imports inventory from Bindiar under 45-day credit terms, and the payment is to be denominated in Bindiar francs. Yu then reviews Transactions 2 and 3. She determines the method that Ambleu would use to translate Transaction 2 into its December 31, 2016 consolidated financial statements. While analyzing Transaction 3, Yu notes that Ambleu purchased inventory on June 1, 2016 for B27,000/ton. Ambleu pays for the inventory on July 15, 2016. Exhibit 1 presents selected economic data for Bindiar and Crenland. EXHIBIT 1 Selected Economic Data for Bindiar and Crenland Date SpotFB/NVK Exchange Rate BindiarInflation Rate (%) Spot CRG/NVK Exchange Rate CrenlandInflationRate (%) CrenlandGPI Dec 31, 2015 5.6780 100.0 Jun 1, 2016 4.1779 Jul 15, 2016 4.1790 Dec 31, 2016 4.2374 3.1 8.6702 40.6 140.6 Average 2016 4.3450 Dec 31, 2017 4.3729 2.1 14.4810 62.3 228.2 Average 2017 4.3618 11.5823 186.2 Prior to reviewing the 2016 and 2017 consolidated financial statements of Ambleu, Yu meets with her supervisor, who asks Yu the following two questions: Question 1: Would a foreign currency translation loss reduce Ambleus net sales growth? Question 2: According to IFRS, what disclosures should be included relating to Ambleus treatment of foreign currency translation for Ngcorp? To complete her assignment, Yu analyzes selected information and notes from Ambleus 2016 and 2017 consolidated financial statements, presented in Exhibit 2. EXHIBIT 2 Selected Information and Notes from Consolidated Financial Statements of Ambleu S.A. (in NVK millions) Income Statement 2017 2016 Balance Sheet 2017 2016 Revenue (1) 1,069 1,034 Cash(3) 467 425 Profit before tax 294 269 Intangibles (4) 575 570 Income tax expense (2) 96 94 Net profit 198 175 Note 1: Cendaros revenue for 2017 is CRG125.23 million. Note 2: Note 3: The parent company transferred NVK15 million to Cendar on January 1, 2016 to purchase a patent from a competitor for CRG85.17 million. Note 4: The 2016 consolidated balance sheet includes Ngcorps total intangible assets of NVK3 million, which were added to Ngcorps balance sheet on July 15, 2016. 25. Which transaction would generate foreign currency transaction exposure for Ambleu? A. Transaction 1 B. Transaction 2 C. Transaction 3 26. Yus determination regarding Transaction 2 should be based on the currency of the: A. loan. B. bank. C. borrower. 27. Based on Exhibit 1, what is the foreign exchange gain resulting from Transaction 3 on the December 31, 2016 financial statements? A. NVK1.70 per ton B. NVK90.75 per ton C. NVK248.54 per ton 28. What is the best response to Question 1? A. Yes B. No, because it would reduce organic sales growth C. No, because it would reduce net price realization and mix 29. Based on Exhibit 1, the best response to Question 2 is that Ambleu should disclose: A. a restatement for local inflation. B. that assets carried at historical cost are translated at historical rates. C. the amount of foreign exchange differences included in net income. 30. Based on Exhibit 1 and Note 1 in Exhibit 2, the amount that Ambleu should include in its December 31, 2017 revenue from Cendar is closest to: A. NVK10.60 million. B. NVK13.25 million. C. NVK19.73 million. 31. Based on Exhibit 2 and Note 2, the change in Ambleus consolidated income tax rate from 2016 to 2017 most likely resulted from a: A. decrease in Ambleus domestic tax rate. B. more profitable business mix in its subsidiaries. C. stronger Norvoltian krone relative to the currencies of its subsidiaries. 32. Based on Exhibit 1 and Note 3 in Exhibit 2, the cumulative translation loss recognized by Ambleu related to the patent purchase on the December 31, 2017 financial statements is closest to: A. NVK0.39 million. B. NVK1.58 million C. NVK9.12 million. 33. Based on Exhibit 1 and Note 4 in Exhibit 2, the total intangible assets on Ngcorps balance sheet as of December 31, 2016 are closest to: A. B12.54 million. B. B12.71 million. C. B13.04 million.