Page 16 - Chapter 22 - Foreign Exchange (Cont.)

Example

16

 A Ltd’s year of assessment ends on the last day of February. On 1

December 2014, the company purchased trading stock from a

supplier in another country for a foreign currency (FC) amount of

FC100 000. The debt was paid on 30 April 2015. All trading stock

was sold by the end of February 2015.

 Assume that the exchange rates on the relevant dates are as

follows:

 1 December 2014 : spot rate…………….......... FC1 = R6,60

 28 February 2015 : spot rate ....................... FC1 = R7,00

 30 April 2015 : spot rate .............................. FC1 = R7,50

Calculate the effect on the taxable income of A Ltd.