CAF-6 · Chapter 4 · Question 2 of 15
A Pakistani company (functional currency PKR) purchases goods from a US supplier for USD 10,000 on credit. At what rate should the transaction be initially recorded?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) The spot exchange rate at the date of the transaction.
Explanation
Foreign currency transactions must be recorded at initial recognition by applying the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.
More IAS 21 Foreign Currency Transactions MCQs
- Q4At the end of the reporting period, how should foreign currency monetary items be re-translated?
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- Q6Exchange differences arising on the settlement of monetary items should be recognized in:
- Q7Which of the following is a primary indicator for determining an entity's functional currency?
- Q8When an entity's functional currency changes, the entity shall: