Page 482 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

F2: Advanced Financial Reporting

What is the annual foreign currency gain or loss that would be recorded
within group other comprehensive income as a result of translating the
foreign currency subsidiary?

A $400,449 gain

B $266,520 gain

C $259,283 loss

D $393,212 loss

18.3 JS has a functional currency of the $. JS acquired 80% of the ordinary share
capital of PJ on 1st January 20X3. PJ was incorporated, operates and pays
taxes in Slumberland, which uses the currency ZZ’s. The head office of PJ is
based in Slumberland. PJ recruits most of its work force and sources its raw
materials locally. It raises its finances independently from local banks. PJ
makes most of its sales abroad in a variety of currencies.

Which of the following statements are true? Choose all that apply

A PJ must use the $ as its functional currency to match the functional
currency used by its parent, JS.

B The presentation currency will always be the functional currency.

C PJ raises its finances in ZZ’s which is an indicator that PJ’s functional
currency will be ZZ’s.

D It is likely that the functional currency of PJ is ZZ’s as PJ is incorporated,
pays its taxes and has its head office in Slumberland.

E It is likely that the functional currency of PJ is ZZ’s as PJ’s raw materials
and labour are paid in ZZ’s.

474