IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

Wiley IFR S: Practical Implementation Guide and Workbook

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MULTIPLE·CHOICE QUESTIONS 1. An entity has several subsidiaries that operate in a hyperinflationary economy which uses the zloty as its local currency. Management wishes to show the financial statements in U.S. dollars. Many of the op– eration s of the entity are within countries that are not hyperinflationary, and these subsidiaries use the euro as their functional currency. What currency should the entity use to present its consolidated financial state– ments? (a) U.S. dollars. Answer: (d) 2. An entity has a subsidiary that operates in a hyperinflat ionary economy. The subsidiary's financial statements are measured in terms of the local cur– rency, which is the zloty. The subsidiary' s financial statements have been restated in accordance with lAS 29. The parent is located in the United States and prepares the consolidated financial statements in U.S. dollars. Which of the following accounting proce– dures is correct in terms of the consolidation of the subsidiary's financial statements? (a) The subsidiary' s financial statements should be prepared using the zloty and then re– translated into U.S. dollars. (b) The subsidiary's financial statements should be prepared using the zloty, then restated ac– cording to lAS 29, and then retranslated into U.S. dollars at closing rates. (c) The subsidiary's financial statements should be remeasured in U.S. dollars, then restated according to lAS 29 and consolidated. (d) The subsidiary' s financia l statements should be deconsolidated and not included in the consolidated financial statements. Answer: (b) 3. An entity is trying to determine which assets and which liabilities are monetary and nonmonetary. Which of the following assets or liabilities are non– monetary ? (a) Trade receivables. (b) Deferred tax liabilities. (c) Accrued expenses and other payables. (d) Taxes payable. Answer: (b) 4. Property was purchased on December 31, 20X5, for 20 million zlotis. The general price index in the country was 60.1 on that date. On December 31, 20X7, the general price index had risen to 240.4. If the entity operates in a hyperinflati onary economy, what would be the carrying amount in the financial statements of the property after restatement? (b) The zloty. (c) The euro. (d) The entity may use any currency.

(a) 20 million zlotis (b) 1,200.2 million zlotis (c) 80 million zlotis (d) 4,808 million zlotis

Answer: (c) 5. The following "equity" relates to an entity operating in a hyperinflat ionary economy:

After

Before !.AS...12.

restatement

Share capital Revaluation reserve Retained earnings

100 20 .sn l.5ll

170

What would be the balances on the revaluation re– serve and retained earnings after the restatement for lAS 29? (a) Revaluation reserve 0, retained earnings 100. (b) Revaluation reserve 100, retained earnings O. (c) Revaluation reserve 20, retained earnings 80. (d) Revaluation reserve 70, retained earnings 30. Answe r : (a)