11 Foreign currency Flashcards
What is the objective of IAS 21?
To produce rules that an entity should follow in the translation of foreign currency activities.
What is the definition of historic rate?
Rate in place at the date the transaction takes place, sometimes referred to as the spot rate.
What is the definition of closing rate?
Rate at the reporting date.
What is the definition of average rate?
Average rate throughout the accounting period.
What is meant by monetary items?
Items that can be easily converted into cash e.g. Receivables, Payables, Loans
What is meant by non-monetary items?
Items that give no right to receive or deliver cash e.g. inventory, plant and machinery.
What is meant by functional currency?
The currency of the primary economic environment in which an entity operates
What is meant by presentational currency?
The currency in which the financial statements are presented
If a transaction is unsettled and is a monetary item, how should this be treated?
Retranslate at closing rate
If a transaction is unsettled and is a non-monetary item, how should this be treated?
Leave at historic rate
How is an exchange difference treated if it relates to trading transactions?
Disclosed within other operating income/operating expenses
How is exchange differences treated if it relates to non-trading transactions?
Disclosed within interest receivable and similar income/finance costs
