CA Inter P1 · Chapter 5 · Question 8 of 12
Under AS 11, exchange differences arising on translation of the financial statements of a non-integral foreign operation should be:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Accumulated in a foreign currency translation reserve until the disposal of the net investment
Explanation
For a non-integral foreign operation, the resulting exchange differences have little or no direct effect on present and future cash flows of the reporting enterprise. AS 11 therefore requires them to be accumulated in a foreign currency translation reserve and recognised as income or expense only on disposal of the net investment.
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