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You are a technical accounting consultant of a Big 4 accounting firm. One of your clients is an Australian travel company that arranges package tours

You are a technical accounting consultant of a Big 4 accounting firm. One of your clients is an Australian travel company that arranges package tours in overseas destinations. The client states as follows: When we arrange accommodation in foreign hotels we recognise a liability at the spot rate. Then when we pay for the accommodation any exchange gain or loss is included in the profit or loss. We believe that we are complying with AASB 121. Do you agree? Explain.

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