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Tute Qs Week 11 - Tutorial Questions for Week 11 commencing...

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Tutorial Questions for Week 11, commencing 19 th October. 1. Why do we need to translate the accounts of a foreign operation? 2. Explain why foreign currency gains or losses in relation to the translation of the accounts  of a foreign operation are not treated as part of the period’s profit or loss, but instead are  transferred to an equity account referred to as the foreign currency translation reserve. 3. What is the difference between the presentation currency and the functional currency?  How would an organisation determine the appropriate presentation currency? 4. Explain what rates should be used for assets, liabilities and equity items of a foreign  entity when translating the accounts to a particular presentation currency. 5. What rates should be used to translate the expense and income items of a foreign entity’s  accounts? When would average rates be acceptable?
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