assume for simplification purposes that it is acceptable to use an average exchange 612665

Translation of foreign currency financial statements – monetary/non-monetary method

Required

The situation is the same as in Example 4. However, CNY is the functional currency of the foreign operation. Consequently, translation is effected according to the monetary/non-monetary method. Moreover, the liabilities of the foreign operation only consist of bank loans. Thus, they represent monetary items. The land, buildings, and inventories are measured at (amortized) cost. The equity (= share capital) of the foreign operation as at Jan 01, 01 is 80 m units of currency F. Assume for simplification purposes that it is acceptable to use an average exchange rate for the year for the appropriate items.