Majority of the business operations of Healthy Ltd are in Malaysia hence Ringgit Malaysia (RM) is the functional currency. The company year-end is on 31 March. There was a foreign currency transaction, as stated below:

 

02 February 2021 Purchase goods on credit from China for RMB 50,000

02 March 2021 Settled the outstanding amount

 

The exchange rates are as follows:

          RM       RMB

02 February 2021        1          1.50

02 March 2021             1          1.58

31 March 2021             1          1.55

Required:

You are required to prepare all the relevant journals with appropriate workings. (5 marks)

 

b) How the accounting treatment for functional currency at the end of accounting period?   (3 marks)

 

 

c) Top Klove, a public limited company, has an overseas subsidiary, Lex. Top Klove is based in a country which has a currency of the dollar. Lex is based in Japan where the currency is the yen. Top Klove sell golf attire and Lex sells golf equipment. Lex is financed by the provision of long-term loans at market interest rates in dollars from Top Klove. Top Klove’s sales are mainly in its own jurisdiction and are priced and collected in dollars. The legal requirements and the business environment in Top Klove’s jurisdiction determine the pricing of Top Klove’s products. Goods and services are sourced locally and paid in dollars but occasionally the entity trades in small amounts in other currencies. Lex conducts its business with significant autonomy from Top Klove as it manufactures golf equipment which it sells mainly in Japan in yen. Local management determines prices based upon the local legal and business conditions. Most raw materials and labour are sourced from local suppliers with a small amount of specialised material sourced from China. Lex sells a small amount of golf attire which it purchases from Top Klove and pays in dollars. The directors require advice on the determination of each of the functional currencies of Top Klove and Lex. Required: Advise, Top Klove on how the functional currencies of Top Klove, Lex should be determined with reference to the relevant International Financial Reporting Standards. (8 marks)

Part B Shareholders are becoming increasingly interested in the environment and social responsibility policies, impacts and practices of business entities, however financial statements have not traditionally provided this information. As a result, there has been significant growth in entities providing narrative environmental information on a voluntary basis. Required: Critically assess the benefits of social and environment reporting to investors for the reporting entities to disclose the information voluntarily. (9 marks)