IAS 21 Flashcards
What is a functional currency?
Currency of primary economic environment in which entity operates
Where is currency translated?
At spot rate at date of transaction
What is restated at year end (closing rate)
Monetary assets and liabilities
Where are exchange differences recognised?
In SPL
How are revaluations charged?
Charged to OCI
What is a presentational currency?
Currency in which FSs are presented
Are presentation and functional currency usually same?
Yes
What influences the choice of the functional currency?
Currency that mainly influences sales prices for goods and services
Competitive forces and regulations determine sales
Mainly influences, labour, material and other costs
A foreign currency transaction?
A transaction which is not in entity’s functional currency
What must happen with foreign currency transaction?
It msut be translated into entity’s functional currency before recognition in FSs
How must entity translate each transaction into its functional currency?
Applying spot exchange rate between functional and foreign currency at date of transaction
If exchange rates do not fluctuate significantly?
An average rate for period may be used as an approximation
Accounting treatment of monetary assets and liabilities? (e.g. receivables and payables)
Retranslated at closing rate
Non-monetary assets measured at historical cost? (e.g. NCA, inventories)
Don’t retranslate, items remain at historical rate
Non-monetary assets measured at fair value?
Retranslate at exchange rate when fair value determined
