Which exchange rate should be used when translating revenue and expense items in the statement of profit or loss and other comprehensive income into the functional currency?
A) Current as at the end of the financial year.
B) Calculated as the average between the rates at the start and end of the year.
C) Current at the dates the applicable transaction occurred.
D) None of the above.

Question

Quizplus · Accepted Answer

The current exchange rate at the date of the applicable transaction should be used when translating revenue and expense items in the statement of profit or loss and other comprehensive income into the functional currency. This ensures that revenue and expenses are reflected at the rate they were actually earned or incurred. Using the end-of-year rate may not accurately reflect the exchange rate at the time of the transaction, while using the average of the start and end rates may not accurately reflect the rate at the time of the specific transaction.

Which Exchange Rate Should Be Used When Translating Revenue and Expense