Infotech Global Ltd. has a functional currency of USD and needs to translate its financial statements into the functional and presentation currency…
CA Final · Financial Reporting · MTP · May 2025
Infotech Global Ltd. has a functional currency of USD and needs to translate its financial statements into the functional and presentation currency of Infotech Inc. (L$). The following balances appear in the books of Infotech Global Ltd. at the year-end prior to translation: USD L$ Property, plant and equipment 50,000 Receivables 9,35,000 Total assets 9,85,000 Issued capital 50,000 30,055 Opening retained earnings 28,000 15,274 Profit & Loss A/c (Profit for the year) 20,000 Accounts payable 8,40,000 Accrued liabilities 47,000 Total equity and liabilities 9,85,000 Translate the above balances of Infotech Global Ltd. into L$ ready for consolidation by Infotech Inc. (Share capital and opening retained earnings have been pre-populated.) Prepare a working of the cumulative balance of the foreign currency translation reserve. Additional information: Relevant exchange rates are: Rate at beginning of the year L$ 1 = USD 1.22 Average rate for the year L$ 1 = USD 1.175 Rate at end of the year L$ 1 = USD 1.13
Suggested Answer and Working Notes:
Translation of the balances for the purpose of consolidation USD Rate L$ Property, plant and equipment 50,000 1.13 44,248 Receivables 9,35,000 1.13 8,27,434 Total assets 9,85,000 8,71,682 Issued capital 50,000 30,055 Opening retained earnings 28,000 15,274 Profit for the year 20,000 1.175 17,021 Accounts payable 8,40,000 1.13 7,43,363 Accrued liabilities 47,000 1.13 41,593 Total equity and liabilities USD 9,85,000 8,47,306 Foreign Currency Translation Reserve (Refer WN-1) 24,376 Total equity and liabilities L$ 8,71,682 Working Note: 1. Cumulative balance of the FCTR Particulars Actual translated amount in L$ A Amount (Refer WN-2) B Difference B-A Issued capital 30,055 44,248 14,193 Opening retained earnings 15,274 24,779 9,505 Profit for the year 17,021 17,699 678 62,350 86,726 24,376 2. Translated amount if the same conversion rate is applied to following items as applied on other items Translated amount Issued capital 50,000 1.13 44,248 Opening retained earnings 28,000 1.13 24,779 Profit for the year 20,000 1.13 17,699 98,000 86,726
Topics: Ind AS 21, Ind AS 12
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