B407F Week 12 (student)

B407F Week 12 (student) - B407F Advanced Financial...

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B407F Advanced Financial Reporting and analysis I The Effects of Changes in Foreign Exchange Rates Illustration 1 A Ltd acquired 80% of the ordinary share of S Ltd, an overseas company, when the retained profit of S Ltd was 30,000 Patus (“P”). At that date the rate of exchange was P4 = $1. S Ltd’s non-current assets were subsequently acquired when the exchange rate was P3.5 = $1 and dividend paid at the exchange rate P2.4 = $1. 12,000 Patus goodwill arising on consolidation was considered impaired and charged to income statement at the beginning of Year 1. Rate of exchange during Year 1 were: Opening 4.0 Average 2.7 Closing 2.4 The functional currency and presentation currency of A Ltd is $. Consolidated Income Statement for the year ended 31 December Year 1 A Ltd S Ltd Rate S Ltd Consolidation $’000 P’000 $’000 Sales 3,274.0 1,210. 0 448.1 3,722.1 Cost of sales (2,652.0) (949.0) (351.5) (3003.5) Gross profits 622.0 261.0 96.6 718.6 Depreciation (140.0) (70.0) (25.9) (165.9) Distribution and administration expenses (160.0) (80.0) (29.6) (189.6) Impairment on goodwill (4) 3 (3) Dividend Income from S Ltd. 5.4 - (3)5.4
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B407F Week 12 (student) - B407F Advanced Financial...

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