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CA Inter The Effects of Changes in Foreign Exchange Rates — practice questions

Explore 6 free The Effects of Changes in Foreign Exchange Rates questions in CA Inter Accounting. Open each question or exercise to read its content, reference answers and available explanation.

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The Effects of Changes in Foreign Exchange Rates questions and exercises with answers

Showing questions 1–6 of 6.

Translation risk concerns exchange-rate effects on what?Read the answer and worked solution →Transaction risk arises from which foreign-denominated items?Read the answer and worked solution →Under the current-rate method, statement items use which rate?Read the answer and worked solution →The temporal method translates specific items consistent with what?Read the answer and worked solution →Balance-sheet hedging aims for net translation exposure of what?Read the answer and worked solution →Natural hedging works by doing what?Read the answer and worked solution →

Worked practice questions

Translation risk concerns exchange-rate effects on what?

  1. Reported financial statements
  2. Bank deposit interest
  3. Contract cash flows alone
  4. Customs duty on imports
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Correct answer: A. Reported financial statements

Translation risk is the extent to which a firm's financial reporting is affected by rate movements when foreign figures are converted.

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Transaction risk arises from which foreign-denominated items?

  1. Receivables and payables
  2. Fixed assets alone
  3. Share capital issued
  4. Depreciation charges
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Correct answer: A. Receivables and payables

Transaction risk exists whenever contractual cash flows such as receivables and payables are denominated in a foreign currency.

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Under the current-rate method, statement items use which rate?

  1. Forward rate of a contract
  2. Rate at creation of each item
  3. Average rate of a decade
  4. The current exchange rate
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Correct answer: D. The current exchange rate

The current-rate method translates every financial statement line item at the single current rate.

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More Accounting topics

AS 3 Cash Flow StatementSchedule III Division I Financial StatementsAS 19 LeasesValuation of Inventories (AS 2)AS 22 Taxes on IncomeAS 28 Impairment of AssetsProperty, Plant and EquipmentAS 17 Segment Reporting