MC Question 6
When a single entity makes purchases or sales in a foreign currency, it will be necessary to translate the transactions into its functional currency before the transactions can be included in its financial records.
In accordance with IAS® 21 The Effect of Changes in Foreign Currency Exchange Rates, which of the following foreign currency exchange rates may be used to translate the foreign currency purchases and sales?
| (1) | The rate which existed on the day that the purchase or sale took place |
|---|---|
| (2) | The rate which existed at the beginning of the accounting period |
| (3) | An average rate for the year, provided there have been no significant fluctuations throughout the year |
| (4) | The rate which existed at the end of the accounting period |
A 2 and 4
B 1 only
C 3 only
D 1 and 3