Question

Foreign Sub, for which the functional currency is the local currency, recognizes a receivable on 11/12/20X1. On December 31, 20X1, Foreign Sub's parent company determines that the exchange rate has changed since the receivable was recognized. In its consolidated financial statements, the parent company should report Foreign Sub's receivable using the exchange rate:_______

a. in effect on 12/31/20X1.
b. that results in the highest reported receivable.
c. in effect on 11/12/20X1.
d. that results in the lowest reported receivable.

Answer 1

c. in effect on 11/12/20X1.

Step-by-step explanation:

According to IAS 21 the exchange rate used to record financial transactions in consolidated statement is the exchange rate at which the transaction took place. There is allowance to used an average rate if the historic rate is not accurate. The receivable should be recorded at the exchange rate which was in effect on 11/12/20X1.