(i) Single transaction:

When you purchase/sell goods from/to other company in other countries

Step1: You need to firstly translate this transaction in functional currency at spot rate.

Step2: You need to retranslate the monetary item (Bank, receivable, payable,NCL,CL) at the year end and leave non-monetary items(NCA, CA).


How to determine your functional currency?

Mainly this is the currency that when you’re trying to prepare your trial balance.

Factors to consider:

  1. Which currency you use to determine selling price and costs?
  2. Which currency is your competitor use to determine selling price or costs?
  3. Which currency you use to finance your business?
(ii) group consolidation

Statement of financial position:       closing rate

Statement of comprehensive income: average rate