IAS 21 - The Effects of Changes in Foreign Exchange Rates

Question 1

Foreign currency transactions

Answer 1

• Initial measurement:
  o At the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.
• Subsequent measurement:
  o Monetary items should be translated at the closing rate on the financial reporting date.
  o Non-monetary items measured at historical cost should be translated using the exchange rate on the date of the transaction.
  o Non-monetary items measured at fair value should be translated using the exchange rate on the date when the fair value was measured.

Reference: IAS 21.21-23