QUESTION 1

1. Which of the following statements is incorrect?

   		Not many companies in Australia have operations in both Australia and overseas locations.
   		The financial statements of an entity may be recorded in a foreign currency and translated into Australian dollars for the purpose of combining those statements with the financial statements of a related Australian company.
   		The relevant accounting standard applied in translating financial statements into another currency is AASB 121/IAS 21 The Effects of Changes in Foreign Exchange Rates.
   		The financial statements of an Australian company may be prepared in Australian dollars and translated into a foreign currency for presentation purposes.

0.2 points

QUESTION 2

1. Which of the following is an additional question to be asked in determining whether a foreign entitys functional currency is the same as that of the reporting entity?

   		All of the above.
   		Are the foreign operations activities carried out as an extension of the reporting entity, rather than being carried out with a significant degree of autonomy?
   		Do the cash flows from the foreign operations activities directly affect the reporting entitys cash flows?
   		Are the transactions with the reporting entity a high or low proportion of the foreign operations activities?

0.2 points

QUESTION 3

1. Where profits generated by the foreign operation are retained in the foreign entity and used for its expansion:

   		the foreign operations currency is likely to be the functional currency.
   		the reporting entitys currency is likely to be the functional currency.
   		the reporting entitys currency is likely to be the presentation currency.
   		the foreign operations currency is likely to be the presentation currency.

0.2 points

QUESTION 4

1. Indicators pointing towards the local overseas currency as the functional currency include: I. Parents cash flows are directly affected on a current basis. II. Production costs are determined primarily by local conditions. III. Sales prices are primarily responsive to exchange rate changes in the short-term. IV. Cash flows are primarily in the local currency and do not affect the parents cash flows.

   		I, II and IV only.
   		II and IV only.
   		I, III and IV only.
   		I and III only

0.2 points

QUESTION 5

1. When translating into the presentation currency, all assets and liabilities are translated using the:

   		average exchange rate for the financial period.
   		exchange rate as at the start of the reporting period.
   		exchange rate applicable when the original transaction was recorded.
   		exchange rate current at the date of the statement of financial position.