Ifrs 외환 손익

이득 & amp; 차이점은 무엇입니까? 손실 및 수익 경비?

대부분의 회사는 수입 명세서에 수익, 이익, 비용 및 손실을 포함합니다. 용어 중 일부는 비슷하지만 수익과 비용은 물론 이익과 손실의 용도가 다릅니다. 각각의 용어 조합과 그 차이점을 살펴보십시오. 궁극적으로 기업은 비용과 손실을 최소화하면서 수익과 수익을 극대화하고자합니다. 그것들은 모두 전반적인 수익성에 영향을 미칩니다.

손익은 회사의 비 주력 운영 및 생산 프로세스를 통해 발생하는 반대 재무 결과입니다. 회사가 소송, 투자 또는 자산 처분과 같은 2 차 소스를 통해 수익을 창출하거나 증가 된 가치를 실현할 때마다이를 이익이라고합니다. 반대로 회사가 2 차 활동을 통해 돈을 잃을 때마다 손실이 발생합니다. 회사가 자산을 판매하는 경우, 이익 대 손실의 결정은 회사의 재무 문서에 따라 자산의 장부 가액에 따라 달라집니다.

이익과 손실과 달리 매출과 비용은 동일한 활동의 재무 결과와 반대가 아닙니다. 오히려 수익은 비즈니스의 기본 재화 나 용역 제공을 통해 얻은 수입을 설명하는 데 사용되는 용어이며 비용은 기본 비즈니스 운영을 제공하거나 생산하는 과정에서 발생하는 비용의 기간입니다.

고려중인 4 가지 조건 중 비용은 가장 다양합니다. 비용은 인건비, 광고비, 임대료, 보험료, 이자, 감가 상각비 및 할부 상환액과 같은 다양한 비용과 관련 될 수 있으며 손익 계산서의 여러 광고 항목에 기록 될 수 있습니다.

IAS 플러스.

개요.

IAS 21 환율 변동 효과 외화 거래 및 재무 제표 운용 방법을 설명하고 재무 제표를 표시 통화로 환산하는 방법을 설명합니다. 기업은 영업 활동이 이루어지는 주요 경제 환경에 따라 기능 통화를 (필요한 경우 사업장별로) 결정해야하며, 거래일에 현물 환율로 현물 환율로 외화 거래를 기록하는 것이 일반적입니다.

IAS 21은 2003 년 12 월에 재발행되어 2005 년 1 월 1 일 이후에 개시하는 회계 연도에 적용된다.

IAS 21의 역사.

관련 프로젝트.

외화 번역.

IAS 21 - 외환 거래 및 선급 고려.

IAS 21 - 순 투자를 헷지하고있다.

기존 국제 회계 기준 개선 (2001-2003)

Deloitte는 Deloitte Touche Tohmatsu Limited, 보증이 제한된 영국의 민간 회사 ( "DTTL"), 회원사 네트워크 및 관련 기관 중 하나 이상을 지칭합니다. DTTL과 각 회원사는 법적으로 독립된 독립적 인 단체입니다. DTTL ( "Deloitte Global"이라고도 함)은 고객에게 서비스를 제공하지 않습니다. DTTL 및 회원사에 대한 자세한 설명은 deloitte / about을 참조하십시오.

하이픈 넣기에 대한 수정 목록입니다.

이 단어는 예외로 사용됩니다. 일단 입력되면 지정된 하이픈 위치에서만 하이픈이 추가됩니다. 각 단어는 별도의 줄에 있어야합니다.

실현 및 미실현 이익 및 손실 정보

국내 (국내) 국가에 본사를 둔 회사가 국내 통화가 아닌 다른 국가의 회사와 거래를 수행 할 때 거래를 정산하기 위해 하나의 통화를 다른 통화로 변환해야합니다. 이 통화를 다른 통화로 변환하면 통화 환율에 따라 이익과 손실이 발생합니다.

이 항목에서는 실현 된 외환 거래 손익에 대해 설명합니다.

실현 된 외환 거래 손익.

바우처 또는 송장 금액에 전액 또는 부분 지불이 적용될 경우 실현 된 환산 손익이 발생할 수 있습니다.

참고 : 손익은 미 지불 영수증이나 송장 금액 대신 각 지불 금액에 대해 계산됩니다.

잔액이 가득 차 있었다.

다음 예제에서는 현금 지불을 통해 거래가 완료되었습니다. 따라서 환산 손익이 실현되었고, 회계상의 의미에서 현금 수령 또는 현금 지불 일에 인식되었습니다.

예를 들어 영국 파운드로 결제해야하는 영국 회사의 상품을 구매하는 미국 회사는 거래를 정산하기 위해 파운드 ($)를 파운드 ($)로 교환해야합니다. 한 통화를 다른 통화로 교환하는 것은 환율을 사용하는 것과 관련이 있습니다. 미국 회사가 6 월 1 일 영국 회사에서 1,000 파운드를 구매 한 경우 환율이 영국 파운드 당 1.40 달러 였을 때 구매하기 위해 1,400 달러를 1,000 파운드로 교환해야합니다.

참고 :이 예제에서 사용 된 환율은 현재 환율을 반영하지 않습니다.

미국 회사가 계좌를 달러로 관리하기 때문에 거래는 다음과 같이 기록됩니다.

6 월 1 일 구입. 1,400

스털링 (Sterling)에서 인보이스 # 1725 지불

& # 163; 1,000; 환율 : 영국 파운드당 $ 1.40

특별 회계 문제는 원 거래 (예 : 계정 구매)와 외화로 현금 거래로 결제 (예 : 미지급금 지불) 사이에 환율이 변동될 때 발생합니다. 실제로 그러한 변동은 빈번합니다.

예를 들어 7 월 10 일에 환율이 엔 ($) 당 0.004 달러 였을 때 일본 회사로부터 100,000 달러를 구입했다고 가정합니다. 미국 회사는 달러로 계좌를 보유하고 있기 때문에 아래에서 볼 수 있듯이 해당 항목은 400 달러 (& # 165; 100,000 X $ 0.004)로 기록됩니다.

7 월 10 일 구입. 400.

채무 - M. Suzuki. 400.

& # 165; 100,000, 환율 : 엔 .004 달러.

지불 일에 8 월 9 일에 환율이 엔당 $ 0.005로 증가한 경우, $ 100 ($ 100,000 X $ 0.005)을 & # 1605 $로 교환하여 지불해야합니다. 165; 100,000. 이 경우 미국 회사는 $ 400의 부채 (미지급금)를 결제하기 위해 $ 500가 필요했기 때문에 환율 손실이 100 달러가되었습니다. 현금 지불은 다음과 같이 기록됩니다 :

8 월 9 일 미지급금 - M. Suzuki. 400.

교환 손실. 100.

송장 # 823에 지불 된 현금.

100,000 달러 또는 400 달러, 현재 환율 : 엔당 $ 0.005.

외국 기업과의 모든 거래는 위의 예와 같이 분석 할 수 있습니다. 예를 들어, 환율이 유로당 $ 0.25 인 5 월 1 일에 미국 회사에서 프랑스 회사로 1,000 달러를 지불 한 판매가 유로화로 청구되었다고 가정합니다 (& nbsp; 4,000 ). 트랜잭션은 다음과 같이 기록됩니다.

5 월 1 일 미수금 - Crusoe Co.. 1,000

& # 128; 4,000, 환율 : 유로 당 0.25 달러.

미국 기업은 현금 수령 날짜 인 5 월 31 일에 유로당 0.30 달러로 환율이 상승하면 200 달러의 환율 상승을 실현할 수 있습니다. 판매일에 $ 1,000의 가치를 가진 4,000 달러는 지불을받은 5 월 31 일 $ 1200 ($ 4,000 * $ .30)의 가격으로 인상 되었기 때문에 실현되었습니다. 현금 수령은 다음과 같이 기록됩니다 :

5 월 31 일 현금. 1,200.

미수금 - Crusoe Co.. 1,000

Exchange Gain. 200.

송장 # 7782로받은 현금.

4,000 달러 또는 1,000 달러, 환율 : 유로 당 30 달러.

부분 지불.

그러나 잔액이 가득 차게 지불되지 않으면 미결 상품권 또는 송장 금액 대신 각 지불 금액에 대한 통화 손익이 계산됩니다. 이득 / 손실 계산을 수행 할 때 시스템에서 다음 공식을 사용합니다.

이익 / 손실 금액 = (지불 / 평균 환율) - (지불 / 지불 환율)

평균 환율 = 외상 금액 미 지불 잔액 / 국내 미납 잔액.

예를 들어 미국 회사에서 물품을 구매하는 독일 회사는 유로화 (& # 128;)로 지불합니다. 미국 회사는 거래를 정산하기 위해 유로화를 미국 달러로 교환해야합니다. 이 경우 독일 회사는 잔고를 완납하기보다는 부분적인 지불을하고 있습니다. 트랜잭션은 다음과 같이 발생합니다.

부분 지불 거래 : 유로화 (미국 달러).

독일 회사는 미국 회사로부터 $ 1.00에 2.00 유로의 환율로 1100 유로를 구매합니다. 유로 200에 대한 대변 메모가 발행되면 $ 1.00 당 4.00의 환율로 $ 50의 크레딧이 표시되어 잔액은 900 ($ 500)이됩니다.

이득 / 손실 금액을 계산하기 전에 시스템은 먼저 외국 잔액을 국내 잔액 (유로 900 / $ 500 = 평균 환율 1.8)으로 나누어 평균 환율을 계산해야합니다. $ 1.00 당 3.00 유로의 환율로 600 유로를 지불하면 손실은 $ 133.33입니다. 시스템은 (지불 금액 / 평균 환율) - (지불 금액 / 지불 환율) 또는 (600 / 1.8) - (600/3) = 133.33으로 손실을 계산합니다. 잔액은 300 유로 또는 166.67 유로입니다.

다시, 이익 / 손실을 계산하기 전에 시스템은 먼저 외국 잔액을 국내 잔액 (유로 300 / $ 166.67 = 평균 환율 1.8)으로 나누어 평균 환율을 계산해야합니다. 환율이 3.00 달러에서 1.00 달러에 이르는 최종 지불액은 거래를 정산하여 66.67 달러의 손실을 초래합니다. 시스템은 (지불 금액 / 평균 환율) - (지불 금액 / 지불 환율) 또는 (300 / 1.8) - (300/100) = 66.67로 손실을 계산합니다.

미실현 환차익 및 손실.

그러나 최초 거래 (예 : 판매 또는 구매 계정)와 현금 수령 또는 현금 지불 일 사이에 재무 제표가 작성되고 원 거래 이후 환율이 변경된 경우 미실현 이득 또는 손실은 진술서에 인식되어야합니다.

예를 들어, 환율이 유로당 $ .50이었던 12 월 20 일에 독일 회사에 1,000 달러의 판매가 이루어 졌다고 가정하고 거래가 다음과 같이 기록되었다고 가정하십시오.

12 월 20 일 미수금 - Mueller Co. 1,000

2,000 유로; 환율 : 유로 당 50 센트.

대차 대조표 일인 12 월 31 일에 유로화 당 45 센트로 환율이 하락했다면, 1,000 달러의 미수금은 단지 $ 900 ($ 2,000 X $ .45)의 가치를 가질 것입니다. 이 "미실현"손실은 다음과 같이 기록됩니다.

12 월 31 일 교환 손실. 100.

미수금 - Mueller Co.. 100.

유로 환율은 2,000 X $ 0.05 하락했습니다.

다음 해 1 월 19 일에 유로화 2,000 원을 받았다고 가정하면 환율이 0.22 달러 일 때 유로당 0.45 달러에서 42 유로로 환율이 추가적으로 하락해야합니다. 현금 영수증은 다음과 같이 기록됩니다 :

1 월 19 일 현금. 840

교환 손실 ($ .03X & 유로 2,000). 60

미수금 - Mueller Co.. 900

송장 # 22로 수령 한 현금.

2,000 유로, 900 달러, 환율 : 유로 당 42 유로.

12 월 31 일과 1 월 19 일 사이에 환율이 상승했다면 1 월 19 일에 환율 상승이 기록 될 것입니다. 예를 들어이 기간 동안 환율이 유로 당 45 센트에서 47 센트로 증가하면 교환 이익은 $ 40 ($ .02 X & euro; 2,000)에 적립됩니다.

회계 기간 말의 교환 손실 계정의 잔액은 손익 계산서의 기타 비용 섹션에보고되어야합니다. 교환 이익 계정의 잔액은 기타 수입 섹션에보고되어야합니다.

외국 종속 회사와의 연결 재무 제표.

국내외 기업의 재무 제표가 연결되기 전에 외국 회사의 재무 제표에 표시된 금액을 국내 통화로 환산해야합니다. 일반적으로 자산과 부채는 대차 대조표 일 현재의 환율을 사용하여 자국 통화로 환산됩니다. 수익 및 비용은 일반적으로 거래가 실행될 때 적용되는 환율을 사용하여 변환됩니다. (실제적으로, 해당 기간의 가중 평균 환율이 일반적으로 사용됩니다.) 전환으로 인한 조정 (손익)은 외국 회사의 대차 대조표의 주주 지분 부분에 별도 항목으로보고됩니다.

외화 표시 재무 제표를 국내 화폐로 환산 한 후 국내외 종속 회사의 재무 제표는 정상적으로 연결됩니다. 자세한 내용은 연결 개요를 참조하십시오.

IAS 21 환율 변동 효과

진실은 우리, 사람들, donвЂ ™ t가 격리 된 체재하고 싶다이다. 우리는 판매, 구매, 수입, 수출, 무역 등을 비롯하여 다른 많은 것들을 모두 외화로 즐기고 있습니다!

비즈니스 세계를 살펴보면 두 가지면에서 글로벌 비즈니스가 이루어지는 것을 볼 수 있습니다. 외화 거래가 개별적으로 이루어 지거나 규모가 커지면 해외 사업 (해외 비즈니스 분리)을 설정하는 경우가 많습니다.

또한 환율은 1 분마다 변경됩니다. 그렇다면이 통화 구성에 약간의 조직을 도입하는 방법은 무엇입니까? 그 в ™ ™ 왜 표준 IAS 21 외환 환율의 변화의 효과가 있습니다.

IAS 21의 목적은 무엇인가?

IAS 21 '환율 변동 효과'의 목적은 다음을 규정하는 것이다.

기업의 재무 제표에 외화 거래 및 해외 사업장을 포함시키는 방법; 재무 제표를 표시 통화로 변환하는 방법.

즉, IAS 21은 다음 두 가지 기본 질문에 답변합니다.

우리는 어떤 환율을 사용할 것인가? 재무 제표의 환율로 인한 손익을보고하는 방법은 무엇입니까?

기능성 대 프리젠 테이션 통화.

IAS 21은 기능 통화와 표시 통화를 모두 정의하고 그 차이를 이해하는 데 중요한 itвЂ ™ s :

기능 통화는 기업이 영업하는 주요 경제 환경의 통화입니다. 그것은 자신의 entityвЂ ™ s 통화이고 다른 모든 통화는 вЂњign 통화 вЂ are입니다.

표시 통화는 재무 제표가 표시되는 통화입니다.

대부분의 경우 기능 통화와 표시 통화가 동일합니다.

그러나 기업은 재무 제표를 기능 통화와 다른 통화로 제시 할 수 있습니다. 예를 들어 외국의 모회사에 대한 연결보고 패키지를 준비 할 때.

또한 기업은 기능 통화가 1 개뿐이지만 기업이 재무 제표를 더 많은 통화로 제시하기로 결정하는 경우 1 개 이상의 표시 통화를 가질 수 있습니다.

또한 기업이 실제로 표시 통화를 선택할 수는 있지만 해당 기능 통화를 선택할 수 없음을 인식해야합니다. 기능 통화는 몇 가지 요인을 평가하여 결정해야합니다.

기능 통화를 결정하는 방법.

기능 통화를 결정할 때 가장 중요한 요소는 그것이 작동하는 엔티티의 주요 경제 환경입니다. 대부분의 경우 엔티티가 운영되는 국가가되지만 이는 반드시 사실 일 필요는 없습니다.

주요 경제 환경은 일반적으로 기업이 주로 현금을 창출하고 소비하는 환경입니다. 다음 요인을 고려할 수 있습니다.

어떤 통화가 주로 상품과 서비스의 판매 가격에 영향을 미칩니 까? 인건비, 재료비 및 기타 비용은 어떤 통화로 표기되고 결제됩니까? 금융 활동으로 인한 자금은 어떤 통화로 생성됩니까 (대출, 발행 된 지분 상품)? 그리고 다른 요인들도 마찬가지입니다.

때로는 판매 가격, 인건비 및 자재 비용 및 기타 항목이 다양한 통화로 표시 될 수 있으므로 기능 통화는 분명하지 않습니다.

이 경우, 경영진은 기본 거래, 사건 및 조건의 경제적 효과를 가장 충실히 대표하는 기능 통화를 결정하기 위해 판단을 사용해야합니다.

기능 통화로 거래를보고하는 방법.

초기 인식.

처음에 모든 외화 거래는 거래일에 기능 통화와 외화 사이의 현물 환율을 적용하여 기능 통화로 환산됩니다.

거래일은 IFRS에 따라 자산이나 부채의 최초 인식 조건이 충족되는 날입니다.

후속보고.

그 다음에 각보고 기간이 끝나면 다음을 번역해야합니다.

마감 환율로 외화로 표시된 모든 화폐 성 항목; 모든 비 화폐 성 항목은 거래일 (과거 환율)의 환율을 사용하여 역사적 원가로 측정됩니다. 공정 가치로 측정 한 비 화폐 성 항목은 공정 가치가 측정 된 날의 환율을 사용하여 공정 가치로 측정됩니다.

외환 차이를보고하는 방법.

모든 환율 차이는 다음 예외를 제외하고는 당기 손익으로 인식한다.

비 화폐 성 항목의 환 율 손익은 항목 자체의 손익 인식과 일관되게 인식됩니다.

예를 들어, 항목이 다른 포괄 손익으로 인식 된 재평가로 평가되는 경우 해당 손익의 환율 변동분도 OCI에서 인식됩니다. 외국 기업에 대한보고 기업의 순 투자액의 일부를 구성하는 화폐 성 항목의 환율 손익은 다음과 같이 인식한다. 분리 된 기업 в ™ ™ 또는 외국 사업 Ђ 재무 제표 : 손익; 연결 재무 제표에서 : 최초에 다른 포괄 손익으로, 이후에 해외 사업에 대한 순 투자를 처분함에 따라 그 차액은 당기 손익으로 재 분류한다.

기능 통화로 변경합니다.

기능 통화가 변경되면 변경 일로부터 새 기능 통화와 관련된 번역 절차를 전진 적으로 적용합니다.

재무 제표를 프레젠테이션 통화로 변환하는 방법.

기업이 기능 통화와 다른 표시 통화로 재무 상태를 표시하는 경우, 그 규정은 기업이 비 초 인플레이션 경제로 운영되는지 여부에 따라 달라집니다.

비 초 인플레이션 경제.

entityвЂ ™ s 기능적인 통화가 hyperinflationary 경제의 통화가 아닌 경우에, 실재물은 번역해야한다 :

각 재무 상태 보고서의 모든 자산과 부채는 재무 상태 보고서 일자의 마감 환율을 사용하여 표시합니다 (비교 표시 포함).

이 규칙은 영업권 및 공정 가치 조정에도 적용됩니다. 거래일의 환율을 사용하는 모든 수입과 지출 및 기타 포괄 손익 항목 (비교 항목 포함).

표준 IAS 21은 실질적인 이유로 일부 기간 평균 환율을 사용할 수 있지만보고 기간 중 환율이 많이 변동하는 경우 평균 사용이 적절하지 않습니다.

결과로 발생하는 모든 외환 차이는 별도의 자본 구성 요소로 기타 포괄 손익으로 인식한다.

그러나 기업이 해외 사업장을 처분하는 경우 해당 해외 사업장과 관련된 외환 차이의 누적 금액은 처분 손익이 인식되면 자본에서 당기 손익으로 재 분류한다.

초 인플레이션 경제.

entityвЂ ™ s 기능적인 통화가 hyperinflationary 경제의 통화 일 때, 접근은 경미하게 변화합니다 :

엔티티의 현재 연도 в ™ ™ 재무 제표는 IAS 29 '초 인플레이션 경제에서의 재무보고 (Financial Reporting in Hyperinflationary Economies)'에서 요구하는대로 먼저 재 작성됩니다. 비교 수치는 이전보고 기간의 재무 제표에서 현재 연도 вЂ ™ s 수치와 동일하게 사용됩니다. 그런 다음에는 위에서 설명한 것과 동일한 절차가 적용됩니다.

IAS 21은 공개 건수도 규정하고있다. 다음 비디오를 IAS 21 요약본과 함께 보시기 바랍니다.

외국환 환율을 사용하는 것이 확실하지 않은 적이 있습니까? 이 동영상 아래에 댓글을 달고 여기를 클릭하여 친구와 공유하는 것을 잊지 마십시오. 고맙습니다!

무료 보고서 Top 7 IFRS 실수.

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회사가보고에서 얻은 7 가지 IFRS 실수를 알아보고 쉽게 피하는 방법!

귀중한 IFRS 미니 코스도 받게됩니다.

무료 보고서를 받으려면 아래 양식을 작성하십시오.

100 % 프라이버시와 스팸 없음, 우리는 약속합니다.

136 의견 :

안녕 silvia, 이 설명에 너무 고마워. 기능 통화와 표시 통화의 차이를 이해하지 못했습니다. & # 8230; 지금은 분명하고 감사합니다.

안녕 Silvia, 이 기사 및 영상에 당신의 좋은 일을 감사하십시오. 다른 상황에서 사용 된 통화를 판단하는 데 실제로 도움이되는 사람들. 너의 좋은 일을 계속해라. 고마워.

다음 두 문장은 항상 나를 혼란스럽게 만듭니다.

결과로 발생하는 모든 외환 차이는 별도의 자본 구성 요소로 기타 포괄 손익으로 인식한다.

모든 환율 차이는 당기 손익으로 인식한다.

그걸 밝혀 주시겠습니까?

안녕하세요 Ezat, 당신의 혼란을 이해할 수 있습니다. 그렇게 쉽지는 않습니다. Please, as the first thing, realize what you’re translating:

- are you translating some individual transactions, like sale in foreign currency, or purchase or anything else? Are you translating these transactions to your own (functional) currency? Then any foreign currency differences go to P/L.

- are you translating the whole balance sheet and income statement to foreign currency (for the purpose of consolidation or any other purpose)? Then you’re probably translating the whole statements to presentation currency and resulting exchange difference goes to OCI.

I’ve been looking for a site that answers some queries on accounting standards explicitly! This one is excellent! I just wouldn’t post my Qs because it’s already being answered. I keep your posts for future reference.

I just wondering how your mind and temper keep managing these Qs.

Hoping you will not get exhausted!

May God bless what you do!

Interesting question I tell you the secret – when I have enough of these queries, I try to keep my hands and mind busy in another way. I do some needlework Embroidery All the best! S.

여보세요. If I am translating the whole if financial statements from functional to presentation currency I have two questions:

1) Assets and liabilities are translated using closing rates. Should we distinguish between monetary and non or in all cases we use closing rates?

2) what about equity? Share capital, share premium, retained earnings? Which rate is to be used?

i like your explain this ias really and i hope to get full tutorial but how i life in egypt ? can tell me the way to get all tutorial for all ifrs.

I would like to the diff between Non-hyperinflationary economy and hyper inflationary economy. 감사.

Dinesh, hyperinflationary economy is discussed in the standard IAS 29 Financial reporting in hyperinflationary economies and this standard provides guidance, too. However, the standard does not establish the absolute rate of inflation for a country to be deemed “hyperinflationary”, it’s a matter of judgement, but as a guidance: for example, if a cumulative inflation rate over 3 years is exceeding or approaching to 100%.

Hyperinflation - Your reply to Dinesh october 12,2014.

Restatements are made by applying a general price index. Items such as monetary items that are already stated at the measuring unit at the balance sheet date are not restated. Other items are restated based on the change in the general price index between the date those items were acquired or incurred and the balance sheet date.

This statement not clear. Could you please help me understanding it more clearly. Which exchange rate should be applied for translating the foreign currency monetary items.

Thank you so much for this explanation, it help me a lot,

i have small Q, how to account for transfers between our bank accounts that one is in our functional currency and the other account is in foreign currency ,

the case i had that we earn divided and it’s deposited in the foreign currency bank account, then after sometime we transfer the monies to the our functional currency bank account?

this is more question of practicalities than the question of what’s written in IAS 21. It strongly depends on how currency issues are covered in your country. Let me give you my own situation as an example:

I am from EU and our functional currency is EUR. When some payment arrives to USD account in USD, it appears in USD on the account, but for accounting records, we need to translate this amount to EUR. In line with IAS 21, we need to use the translation rate at the date of transaction (when money arrived). In line with our legislation, that would be the rate set by the European Central Bank (ECB) at the date preceding the transaction – which is perfectly acceptable for IAS 21. In your own country, that might be different, but you should be looking at central bank rates, not commercial banks for this particular case.

Hi silva. Appreciate your effort.

Here’s what I need to know, when translating individual financial statements of a foreign subsidiary into presentation currency of the parent, will the resulting differences ( that are recognised in the separate component of equity in the individual FS ) be charged to CRE and NCI of the consolidated accounts in their respective % ?

Also, where will the exchange difference of goodwill arising on acquisition be charged?

Have an exam in 3 days!

hope it’s not too late for your exam! To reply your questions:

1) No, all the differences are presented in 1 line: CTD (currency translation difference). They are not split.

2) Hmhm, I think goodwill arising on acquisition is a historical item appearing only in the consolidated financial statements, not in the separate FS of a foreign subsidiary.

On acquisition, you calculate goodwill using the actual translation rates at the date of acquisition. I just don’t like the idea of translating it by the current rate – as it’s a historical asset, but the exchange rate is grouped with all other exchange differences.

Hope it helps and good luck to your exam!

Thanks a lot Silvia.

And yes, we do translate goodwill on acquisition date and at year end closing rate (just like the rest of the assets). I think this is because if the translation is taking place for consolidation purposes only, all the elements of the financial position will be covered.

Correct, that’s what IAS 21 requires. I just don’t like it – my personal opinion. Anyway, exchange difference arising on translation of GW is a part of that OCI component “CTD”. 행운을 빕니다!

Yours is the only resource that that i have found on-line that explains properly what IAS 21 is all about – 고맙습니다. but i am still having a problem understanding it 100%. I am invested in a company on the UK stock market. they are a gold mining company based in South Africa. their functional currency is ZAR and their presentation currency (for the purpose of releasing annual reports to UK shareholders) is in Sterling. their most recent P&L account states that profit-after-tax was ВЈ26m…but then then in comprehensive income it states that Foreign currency translation differences amount to ВЈ25m ! therefore almost completely wiping out reported profit.

I cannot work out what could cause foreign currency translation differences to amount to ВЈ25m and there are no notes in the annual report to explain (probably they are hoping no one will notice !) would you be kind enough to give an example or two ?

foreign currency translation difference in OCI is exactly what I refer to as “CTD” or “currency translation difference”. It is because when your company is translating its financial statements from ZAR (functional currency) to GBP (presentation currency), it uses different exchange rates for translating assets and liabilities (closing rates) and for translating income and expenses (average year rates).

You also need to realize that CTD in OCI is CUMULATIVE – it does not arise only in the current reporting year, but it is accumulating from the initial date of translating financial statements in the presentation currency.

CTD of GBP 25m is probably cumulative figure. Please try to look at previous year’s numbers and the balance of CTD. Newly arisen CTD is a difference. Or you can look to the statement of profit or loss and other comprehensive income – you’ll see exactly how much CTD grew in the current reporting year.

Hope it helps! S.

Thank you Silvia yes you are correct of course, the OCI for this year is ВЈ25m and the previous year was ВЈ20m so ВЈ5m difference. Thanks a lot for your help.

I would appreciate if you could help me with following issues:

Issue for foreign currency transaction.

1. Initial Recognition.

100% advance has been released at certain rate and final invoice with material is received after for eg. two months during which different exchange rate exists. So which rate to be used, the rate at which the advance has been released or the rate existing on the date of actual receipt of goods.

2. For 100 % advance which has remained unadjusted on the date of closing, do we have to translate at the closing rate.

3. Subsequent Recognition of Liability.

Procurement of assets in foreign currency - on settlement of liability, the difference is charged to asset (if the asset is in Work in progress stage) or to gain or loss.

aaaaaa, advance payments – everybody treats that differently!

OK, but here’s my opinion:

1) If the advance payment was made for the specific asset (inventories or PPE), then do not revalue it, but simply treat a part of acquisition cost in the original FX rate of payment. The reason is that IAS 21 requires you to translate the foreign currency transaction with the rate AT THE DATE of transaction.

Now, what is the date of transaction? IFRS say that it is the day when the transaction appears for the first time in your financial statements. In this case, you start acquiring asset at the date of making prepayment.

2) Again, when it is an advance payment for the specific asset, it is non-monetary asset (as you have no right to receive cash… you are just expecting the non-monetary asset to be acquired). No revaluation.

3) IAS 16 does not permit capitalizing FX differences so to P/L.

Interestingly, and the analogue is?

But i still have that small doubt with regards to the translate the foreign currency transaction with the rate AT THE DATE of transaction. I am interpreting AT THE DATE of transaction as the date i recognize asset which i would do that when asset is actually received and not the date the advance is released , at the time of release of advance , asset is yet to be formed a such is not recognized in the books. For eg. if we had not released advance then asset would have been recognized on the rate the asset is received , so if i am to assume asset value would be recognized at the time of payment if no advance has been released.

I hope i am making sense.

Yes, it makes sense and I understand your doubts. Believe me, everybody is treating that differently as there’s no specific guidance in the standards for that.

Try to look at it in a different view: what is your real cost of acquiring the asset? Your real cash out? Part of it was done when you paid the advance payment. If you translate the advance payment with the rate of invoice, then you are effectively capitalizing foreign exchange rate differences (and you should not do it).

At the date of transaction = the first time when the transaction appears in your financial statements. Sure, if you don’t pay any advance, then it is the delivery date. But if you incurred real cost (payment) before that day…

There’s a lot of discussion going on about it. My opinion is that you should take your real cost.

Here also I have One Doubt.

At the date of transaction = the first time when the transaction appears in your financial statements. Sure, if you donвЂ™t pay any advance, then it is the delivery date. But if you incurred real cost (payment) before that dayвЂ¦

What will be the treatment if 50% advance is Paid and 50% paid one month after delivery. Which exchange rate should be applied for recording the purchases. Here date of Transaction is 50% advance payment date.

Really confused Forex Accounting .

Then what will happen if the asset is received ahead and payment is made few months later. So here also do we recognize asset two months later.

Sonam, since this discussion, I wrote an article about prepayments specifically, please refer here.

Dear Silvia, Thanks for creating and sharing these very good articles and videos. I watched the video and read the article on IAS 21 and have some query. I need to prepare individual subsidiary balance sheet and income statement on parent’s currency.

1. Do I retranslate forex gain/loss recognised in I/S in functional currency by using average rate in I/S of parent’s currency? Note, forex gain/loss include loan received from parent in parent’s currency.

2.Is it alright to recognise the gain/loss from exchange difference in retranslating net profit in closing rate in B/S and average rate in I/S as Other comprehensive income in I/S in presentation currency?

I would be really grateful if you kindly help me out on this two issues. 감사.

Thank you for these wonderful articles,

I would appreciate if you could help me in the following issue :

We have recorded one transaction in the month of Jan’15 by using the exchange rate prevailing on that date. Now we are required to reverse the transaction because it was posted inadvertently. The reversal entry should be passed in the month of March’15. Can we use the exchange rate we used while passing the original entry? Or should we use the exchange rate of March’15.

if that’s just annulation (as the transaction would have never happened), then do it with the original FX rate.

Thank you Silvia…

this is very informative. I cannot seem to find the answer here, (or anywhere), however, to an issue with our German subsidiary (parent is US based). Each month’s valuations for exchange rate are posted to the P&L, but we use an unrealized gain/loss account to do so. Our German subsidiary, though, posts all of its changes in the value of its cash bank accounts to Realized gain/loss, not unrealized. Both are hittin gthe P&L properly, so that is not a major issue. I am just trying to get an understanding whether theis is required by IFRS vs GAAP in the US which would just use unrealized gain/loss.

It is me again with tricking question… looking for a fresh view.

The Company has a contract with a constructor fixed at the local currency. At the same time the contract has a clause saying that in case the local currency depreciate against USD more than 3 points, the payment is to be increased by the difference in exchange rates. For example, total trade payable is 500 local currency (or 100 USD) at recognition and at the payment date the local currency depreciate to 60 per USD, therefore the final payment is to be made is 600 local currency.

The question is whether there is exchange loss and should it be capitalized to the constructed facility or recognized in PL.

It looks like that initially it is USD contract and no forex loss/gain is to be recognized (functional currency of the Company is USD). However if the difference is less than 3 points than no compensation is made and the forex gain is recognized on trade payable up to 3 points. Moreover, there is no mention if the local currency appreciates against USD (which did not happen in the past).

For me there is embedded derivative instrument, rather than USD Trade Payable and therefore IAS 39 applied. I am wondering whether you have different view? And how would you account for this transaction?

My South Africa branch purchases goods in USD from Japan/India.

Once supplier ship out the goods, my SA branch records liability in the books. (during this time the exchange rate ZAR to USD is say 11)

So system records liability in ZAR based on exchange rate of 11.

When the goods are actually received by SA branch, the exchange rate is 12. So while posting Goods Receipt, system identifies this difference of 1 (exchange diff) and Debit Merchandise a/c in BS and credits exchange gain account in PL. Is it correct?

Is it right to increase/decrease the inventory for exchange rate fluctuation? Please advice.

it depends on the terms of delivery – when the risks and rewards of ownerhip pass to your branch? And how is the initial transaction (when the supplier ships the goods) recorded? Inventories are non-monetary item and therefore, you should keep them at historical rate. The question is when the ownership passes to you – if it’s at the moment of shipping the goods, you should keep them at 11. S.

Thank you so much for your quick reply.

In this case the delivery term is FOB. So once the BL is issued, we need to recognize the liability. However goods may arrive after 1 month by which time, the exchange rate is changed. In this scenario, to which account we can charge this cost (if not merchandise). One side of the entry is clear i. e. is exchange gain/LOss to the PL. Pl advise.

In this case, the date of ownership transfer (and recognition of goods) is when the goods are loaded for transport. Since that point, it’s you who controls the goods. Therefore, you should use the historical rate of 11, also for posting the goods from goods in transit to goods in the warehouse. S.

If the fx change. is any effect on parant and subsidiary firm net profit.

A question on FX unrealized gains and losses for interco loans: we remeasure all outstanding IC BS positions using Group determined FX rates as of year end. And if we have long term loans is it possible to show these unrealized gains and losses from remeasurement in OCI as part of equity and exclude them from PNL? Under US GAAP it is allowed. But I did my research on IFRS and I can not fild an answer. As usually please help.

if you classify your loans as debt securities measured at fair value through OCI, then the foreign exchange gain/loss would be a part of fair value remeasurement and posted in OCI. This is the new category introduced by IFRS 9 and it is also covered in the IFRS Kit with example. S.

I am practicing in Nepal. Regarding the translation of Financial Statements into Reporting Currencies of parent Company the assets and liabilities were translated into reporting date exchange rate of Central bank and for translating the income statement yearly average rate has been considered. The Difference was presented in OCI. Please let me know whether this is correct? 감사.

Yes, that’s how you should translate the financial statements into the presentation currency. S.

If the Functional Currency of the Parent Company is USD and the Subsidiary is in SGD. Will a Capital injection from Parent Company in USD to the Subsidiary result in any exchange differences.

I have a question on how to determine functional currency for cost plus entity (IFRS) for entity A.

The fact pattern:

Entity A (MY)- principally involved in assembling and testing products for its immediate parent entity which is Entity B (US).

Entity A generate revenue under cost plus arrangement to Entity B under TP agreement.

Revenue is generated in USD (under cost plus model)

Direct costs is MYR (labor charges/direct materials).

based on this fact pattern, what will be the appropriate functional currency for Entity A and how to justify on the its?

Regards and thank you.

Kindly help with the treatment of exchange gains or losses in a forward contract arrangement (forward contract here is for construction of non current assets.

without knowing what the forward contract is about I can’t help really – not enough information. S.

My parent company has given a USD loan us (subsidiary ) 3 years ago and at that time they did not ask us to repay. therefore, we did not revalue the currency . But now we have to pay it. my questions are.

1. Do we need to revalue USD loan.

2. what possible way to reduce our big loss on this USD revaluation.

yes, you should have revalued this loan also in the previous periods under IAS 21. Now, clearly, you made an error as you have not applied IAS 21 properly. Therefore, I would calculate the profit or loss impact of revaluation in the previous periods and if it is significant or material, then I would make a correction in line with IAS 8.

This way, “big loss” on USD revaluation would be spread over 3 periods and a part of it would be recognized in equity as a correction of error.

Now its clear. Thank you for your great advice.

At year-end we had revalued goodwill that arised on consolidation at closing exchange rate and resulted in write-down which we have taken it to CTA in equity. Does changes in CTA balance will impact consolidated cash flow statement?

Me and my colleagues always have this arguement on whether to translate monetary items at the reporting date using “Buying” rate or “SElling” rate. I am of the argument that the rate at which i can buy the foreign currency should be used meaning the selling rate set by the bank. For example if my functional currency is USD and i need to translate EURO in to USD i should take the rate at which i can exchange USD to Euro right?

좋은 질문. Well, it depends on what’s available. In the EU, European Central Bank sets the rates for the other currencies and many companies simply use these rates, regardless the commercial rates of the bank.

However, IAS 21 in paragraph 26 states that when you have several rates available, then you should take the rate at which you would settle the liability or recover the asset at the measurement date. Practically it means – if you have USD receivable, then you use buying rate (you will receive USD and bank buys them to convert to EUR), and if you have USD liability, then you use sell rate.

Anyway – you absolutely need to be consistent and use the same principles every time. Hope this helps! S.

Regarding the example that you gave with USD receivable, should we not use the buying rate for such an item ? Let me explain :

We have 1000 USD receivable from Debtor X. The presentation currency of our company is EUR.

USD to EUR – Buying rate : 0.75 (the bank is buying 1 USD for 0.75 EUR)

USD to EUR – Selling rate : 0.80 (the bank is selling 1 USD for 0.80 EUR)

Debtor X pays us the 1000 USD.

In the current context, I have obtained USD from Debtor X and to know the value of the USD in terms of EUR, i need to Sell this USD to the bank. This means that the bank would be Buying my USD and for each 1 USD, I would receive 0.75 EUR.

Based on that, should we not be using the bank buying rate for such a type of receivable ?

Of course, you are right! Corrected!

Thanks for your prompt reply Silvia.

I also have another question relating to the year end retranslation of balances. I’ve been browsing IAS 21 to obtain an answer to these but without success :

Upon retranslating all foreign currency monetary amounts to the presentation currency, there are gains and losses which arise.

Are all foreign exchange gains/losses accounted for as realised or unrealised ?

Could you also explain the logic behind classifiying the gains/losses as either realised or unrealised ?

when you translate to presentation currency, don’t calculate any gains or losses, simply translate. There will be difference between total assets and liabilities – this is currency translation difference presented in equity. S.

I would like to know what accounting entries would be made upon the year end translation of financial statements to the reporting currency.

Let’s take the below example :

Reporting currency of the business is USD. It has foreign debtors and creditors in EUR. Let’s assume only these 2 items to calculate the CTD at year end (31 Dec 2016).

Rate EUR to USD at 1 Jan 2016 : 1.5.

Rate EUR to USD at 31 Dec 2016 : 1.3.

Foreign debtors (EUR) at 1 Jan 2016 and 31 Dec 2016 : EUR 1000.

Foreign debtors (USD) at 1 Jan 2016 : USD 1500 (1000 x 1.5)

Foreign debtors (USD) at 31 Dec 2016 : USD 1300 (1000 x 1.3)

Foreign creditors (EUR) at 1 Jan 2016 and 31 Dec 2016 : EUR 2000.

Foreign creditors (USD) at 1 Jan 2016 : USD 3000 (2000 x 1.5)

Foreign creditors (USD) at 31 Dec 2016 : USD 2600 (2000 x 1.3)

From here on, how do we calculate the difference between assets and liabilities and how do we record the CTD as a separate component of equity at 31 Dec 2016 ?

미리 감사드립니다.

I am doing year end account for one of my client, they have an account in Euro and ending balance showing in GBB in my bookkeeping system is different if I use the actual exchange rate on the date. My understanding was the difference on exchange should reported in equity as Unrealised gain or loss the P&L. Please correct me if I am wrong.

that depends on what you’re trying to do. Are you translating foreign currency amounts to your functional currency? Then translation differences are reported in profit or loss, not equity. S.

Thank you for this. I appreciate your explanation.

Please kindly shed some light on the following.

Please for a financial statement, when you translate the bank Balances in foreign curency using the closing rate the gain or loss as a result of the translation-is it realized or unrealized?

If realized or unrealized what are the tax effect.

it’s realized (as any other foreign currency difference). The tax effect depends on the tax legislation of your country. 예 : in our country, these realized differences are optionally taxable (you can opt to tax them when they arise, or not to tax them at all). S.

Hi Silvia, could you please inform the gains/losses raised from the revaluation of bank balances in foreign currencies should be classified as realized or unrealized according to IFRS?

I assume you are translating into the functional currency. In this case, it’s realized in profit or loss (anyway, IFRS do not know the term “unrealized”). S.

Thanks for quick answer, my local Financial statement currency is EGP and my question is regarding reevaluating the bank balances in foreign currencies (the equivalent of these currencies in EGP in my books) the FX gains or losses appears is realized? I need your reply for my local reporting and for the consolidated report for my group (more than 1 company report)

Yes, these gains and losses are realized, that is in profit or loss. S.

I have following queries:

1. Exchange Gain or Loss – Realized and Unrealized: How to present it in financials.

вЂў As Raw material Cost i. e before gross margin.

вЂў As finance cost i. e after gross margin.

вЂў Realized and unrealized Both as finance cost.

вЂў Realized and unrealized Both as raw material cost.

2. Finance Cost: Inclusion and exclusion Trade Finance and Bank Charges, Overdraft interest shall form part of finance cost or bank interest, LC Commission shall form part of Raw Material cost or shall be treated as bank charges (may not be relevant to IFRS) just the accounting treatment.

3. Revaluation of Forex assets and liability at period closing, eg cash backed LC, how to treat this…

Suppose I have an external commercial borrowing(India) of 100M USD for 10 years, with conversion rate of 1USD= 50INR.

Now I hedge this and I have a 10M debtor every year.

If in future the exchange rate becomes 1USD=60INR, how would my liability be impacted and what would be the balancing accounting.

On my books in INR, I will have a 6000INR loan, but how would I balance this?

Dear Chirag Jain,

if you do it right, then you would have a corresponding derivative asset amounting to approximately 1000INR in your accounts. S.

나는 질문이있다. If my entity has a functional currency of EUR and it has foreign currency transactions in GBP, when I go and prepare the accounts in a GBP presentation currency, do I apply a period end rate to my original GBP transactions or just use the original GBP amounts?

Dear Richard, please apologize for the later response. Let me split it:

- Monetary assets/liabilities: At the year-end, you translate it from GBP to EUR, you use closing rate, isn’t it? Then when you translate it back to GBP (as to presentation currency), you use the same rate and you should be fine.

- Non-monetary assets/liabilities: At the year-end, you do not translate them, but you keep them in a historical rate. However, after you recognized the asset initially, it stopped being GBP asset and became EUR asset (it’s non-monetary). So yes, apply closing rate.

- Transactions in P/L: you should apply the transaction date rates, so you should be OK.

Hope this helps! S.

Hi, Silvia. I have a question about translating statements from functional currency to presentation. Is the resulting difference in OCI is just an item (line) which balances other items of statement of financial position with each other? Or there should be some postings in the accounting books? It`s a little bit confusing, because if we have operations in different currencies other than functional and we report in the functional currency, the exchange difference goes to P/L.

But I think the first variant is right.

Yes, Katrine, the first variant is right. Translating FS to presentation currency is NOT a bookkeeping operation – it’s just a presentation. S.

감사! It helped a lot)

Hi, Silvia. I`m wondering is there any situations when IAS 21 may not be applied. Particularly I`m interested in the preparation of statements in the reporting currency other than functional. I`m working in the company that prepares statements for its Holding, using the closing rate for all items, including retained earnings, so there is no need of including differences in OCI. But Holding is the European company and works according to the IFRS requirement. My colleagues don`t know. You are my only hope.

well, as soon as a company or a holding applies IFRS, then it must apply ALL IFRS standards, including IAS 21. There is no exception. So, if your financial statements will be a part of holding’s consolidated financial statements under IFRS, then yes, you need to apply IAS 21. S.

I have seen one IFRS interoperatation Committe for Revenue Recognition when the Sales Contact is in Foreign Currency (Foreign currency translation of Revenue)

Foreign currency translation of revenue: views 5.

Revenue is recognised using the spot rate at the date:

вЂў an enforceable contract is entered into (T0): View A.

вЂ“ rights and obligations of transaction established at this date.

вЂў advance payment is received (ie on recognition of deferred.

revenue) (T1): View B.

вЂ“ first recognition of transaction is when either of parties to contract first.

вЂў the revenue is recognised (T2): View C.

вЂ“ if payment is in advance, the difference between the deferred revenue.

balance and amount of revenue due to fx movements is recognised.

as an exchange gain/loss as revenue is recognised.

вЂ“ delivering services/goods is viewed as a transaction in its own right.

You have any idea about finalisation of above issue .

Advance Payment Received.

Which Exchnage rate we should use for entering Sales & Purchases ?

your clarification is highly useful.

More on this topic.

Honestly speaking it is difficult to understand the topic. suppose the following is the case.

Contract signed Jnaury.

Advance Payment Received (30%) February.

Goods Supplied. May.

Remaining amount Received (70%) July.

Hi Albi, no, this issue has not been completed yet. And, it’s so complex, that it’s difficult to respond within 1 comment, but I can write an article with a case study in the future. S.

thank you in advance for that Article. That would be a great research.

If feasible, please consider Payments to Supplier also.

Contract in Foreign Currency (Sales& Purchase)

Contract signed with Client Janaury.

Contract signed with Suppplier Janaury.

Advance Payment Received from Client (30%) February.

Advance Payment to Supplier (70%)-March.

Goods Supplied - May.

Remaining amount to Supplier (30%)-May.

Remaining amount Received from Client (70%) July.

Many accountants & Auditors are confused about the proper treatment. If we use spot rate for recording all the transactions, There would be misleading result. If exchanges rate goes up during the period, better to delay the receipt from Clients if rates decreases then huge loss.

I am from the Philippines. My client has a foreign currency bank account. At year end, I translated the balance using the closing rate for Financial reporting purposes. How do I account for the foreign currency gain/loss? Is it “unrelealized” or “realized”? 고맙습니다.

it’s realized, i. e. you recognize the gain or loss via profit or loss account. S.

Is there any possibility of an unrealized gain portion for cash?

I really like your explanations on IFRS but i also need clarifications IAS 21 (Foreign currency translation) on tax administration that collects in different currencies and now during reporting what would be the treatment of the opening balances, period collections, treatment of the loss/gain on translation and closing balances presentation.

please, you need to describe the transaction more precisely. When tax is paid in your local currency on foreign currency items, then the translation depends also on the tax rules, not only on IFRS. But in general – all these payments are translated either via real rate recalculated by your bank, or by the spot rate, as they represent the translation from foreign currency to your functional currency. Opening tax liabilities in foreign currency are translated by the closing rate (of previous rep. period). Gains/losses are reported in profit or loss. S.

i have a issue regarding loan revaluation. can you tell me which rate is use for revaluation of loan?? i. e. buying rate or selling rate. this revaluation is not for a bank or any financial institution.

Thanks for IFRS Box , has always been helpful, please if I have taken a loan denominated in foreign currency and at each reporting date , I convert to my functional currency at the closing rate at that period , will the exchange loss or gain go to OCI or P&L.

P/L, because it’s a monetary item. S.

I am not yet due to pay back the loan , is the exchange rate realized or unrealized . Also is there any situation I can treat the exchange loss through OCI.

Dear Silvia , In case the company decides to change the prtesenatation currency during the year, then how to translate comparative figures. Also wrt current year figures-is the procedure same as for change in functional currency.

IAS 21 does not say anything about the change of presentation currency, but it is appropriate to follow the rules for change in accounting policy under IAS 8 (unless it is not practical), i. e. retrospective application.

I have one question as follow.

Our subsidiary is based in Mozambique where the exchange rate was about 30 at 31/12/2014 and 44.49 at 31/12/2015 and around 78 at this moment. However, the official inflation rate of this country is relative low (about 15% in 2016) and will not be over 100% for the last 3 years.

Can we consider Mozambique a hyperinflationary economy? If not, what can we do to ensure the comparability of prior period information.

Thank you in advance for your help,

Sorry, I would like to add further information.

This question is for the consolidation purpose. The parent company is reporting in USD while the subsidiary is reporting in MZN (Mozambique local currency).

well, the criterion about the official rate being over or coming close to 100% for 3 years is not decisive. There are more factors to consider whether the economy is or is not hyperinflationary – 예 : how do people keep their wealth – in foreign currency? In local currency? Or, are interest rates, salaries and prices anyhow linked to a price index? etc. For more guidance, please look to IAS 29.3.

Then, if there are no such indicators, and you conclude that an economy is not hyperinflationary, you just don’t apply IAS 29. S.

would you please clarify the deference between the translation in subsequent report in How to report transactions in Functional Currency paragraph and How to translate financial statements into a Presentation Currency paragraph as the non monetary items well translated at historical cost initially then we well translated them at closing rate when we translate financial statements?

Also Silva need advice regards the risks that may arise if we replaced volatile functional currency with one of major currency like $( specially in.

Hyperinflationary economy environment )

Hi Hisham, if you don’ translate all your financial statements into some other (presentation) currency, then you do nothing with your non-monetary asset. If you do translate your financial statements to the other currency, then you use closing rate for all assets including non-monetary. I think I explained it in the paragraph Functional vs. Presentation currency.

Hi there Silvia, I would like to obtain a clarification with regards to the term “Settlement” as used in IAS 21.

In paragraph 15 of IAS 21, it is stated as follows :

“An entity may have a monetary item that is receivable from or payable to a foreign operation. An item for which settlement is neither planned nor likely to occur in the foreseeable future is, in substance, a part of the entityвЂ™s net investment in that foreign operation, and is accounted for in accordance with paragraphs 32 and 33.”

Does SETTLEMENT of the intercompany balance refer only to payment, as in, cash payments ? Or let’s say, to settle a loan payable to its parent, a subsidiary issues shares to the parent. In substance, would the issue of shares be considered as a form of settlement ?

My interpretation of this is : since the liability of the subsidiary towards the parent no longer exists because of the issue of shares, this is in substance, a settlement of the loan.

Please tell me if I’m right here.

미리 감사드립니다.

Yes, Rishi, I agree. Settlement is a broader term, not limited only to a payment or cash (that would be “cash settlement”).

Thanks for the reply Silvia.

In consolidate foreign operation to presentation currency, IAS 21 states that the results and financial position of foreign operation shall be translated using:

- Assets, liability: closing rate.

- PL: average rate.

However, I don’t know the mentioned fx rate at closing date is the Fx rate used to FX revaluation of foreign operation or parent company at reporting date?

Due to parent company has cash in foreign operation’s currency, it will revaluation foreign cash at reporting date using closing rate. I wonder if using the closing rate of foreign operation to translate to presentation country leads to different applied closing rate in consolidation FS.

And the average rate will get from foreign operation or parent’s transaction?

Hope to see your answer, thanks!

My company is located in Nigeria and functional currency is Naira. our transaction included foreign currency as well as we are involved in Port Logistic services under Oil and gas sector. Every month we run exchange routing to align our current assets and Liability with closing rate.

Now my boss has ask me Balance sheet in USD currency as of end 31st Oct. if I convert all the assets and Liability with closing rate of Oct, then my assets will drastically reduced in term of USD currency compare to last year. the last year rate was 197.5/USD where as of Oct closing rate is Naira 315/USD.

Should I convert with closing rate assets or I should use historical rate.

I should use closing rate only for Current assets and current liability. For assets I should use historical rate?

if I use historical rate only for assets then I am generating difference around 153Mil USD which I have to show under share capital to make the tally Asses-Liability=share capital.

it depends on whether you want to follow IFRS or not. If yes, then technically speaking, you will be translating your financial statements to another presentation currency and in such a case, you need to use the closing rate (in this case, you don’t care about monetary/non-monetary items and historical rates).

Unfortunately, Naira weakened a lot and you could show very high “CTD” or currency translation difference in your equity to balance assets with liabilities.

Dear Silvia, one question regarding PPE traslation.

(I am in Argentina, our funcional currency is PESOS, but the presentation currency (in order to send montly package to Vienna) is USD.

1) In 2006 we bought a warehouse. The cost was 1.055.00 USD. The fx rate at that moment was 3,07. Therefore It equeals to 3.238.850 PESOS.

2)Then, at the end of each month, I have to do the “periodic valuation”. Considerig it is a non monetary item and we measure according historical cost, I have to transalte those 1.055.000 usd to the “historic rate” (3,07). Therefore, by the end of the month the amount in PEOS is the same.

3) Transaltion into presentation currency:

IAS 21 says that all assets have to be translate using the closing rate, BUT in this case this asset is nominate in USD (it was a result of a foreing transaction). So in this case I do not have to transalte from PESOS to USD right? The amount in USD to report in package will allwasy be 1.055.00 USD?

Thanks in advance!!

unfortunately not. PPE is a non-monetary asset and once it sits in your account, you stop thinking of it as about “USD” asset. So no, the amount on your fixed assets will not be 1055 USD, but 3 238 850 pesos translated with the closing rate. S.

Hello I’m in Lebanon and I’m not able to purchase the IFRS kit why? Why my country not on the list.

I think PayPal does not work in Lebanon, that’s why your country is not on the list. For this reason, you can make a payment with the alternative payment gate, directly with the credit card here: sites. fastspring/ifrsbox/product/ifrs-kit-offer.

If you need my further help, just let me know. Kind regards, S.

Hi Sylvia, Revenue was recognised in year 2014 in VEF which has steeply declined up till 2016, subsequently invoice was also cancelled and reissued with revised rates in 2016. Should revenue be also reversed in 2016 and re-recognised at a revised rate or it should be adjusted through retained earnings? Could you please quote relevant para of IFRS addressing the issue? 많은 감사드립니다.

the good question here is why the invoice was cancelled and reissued – was is just due to the change in the VEF?

If it relates to the correction of the revenue itself, then yes, it would be appropriate to correct the retained earnings (it’s a correction of error in the past, please see IAS 8).

If it relates only to the change in VEF and adjusting the receivable in VEF to reflect the change, but it has nothing to do with the past revenue, then I would simply recognized changes in P/L. The reason is that it’s a current-year transaction, something like “revising a receivable and passing the loss to a client”. S.

Dear Silvia, Thanks a lot for your reply to Allan. Really appreciated. What I would like to ask further is that I have seen a lot of leading companies declaring revenue results post and pre Foreign Exchange Gain/Loss. If I go by your approach then why do they absorb the foreign exchange impact in the revenue line. To be more specifc US Dollar appreciated in Q1 2015 and leading companies such as Genral Motors, Coca Cola etc. put out their result showing a pre & post Fx impact. We thank you once again for a continuous support you provide to readers all across the world. Kindly keep up the good work.

In Allan’s case, it was one specific case and from the question it was implied that the revenue was adjusted by the difference in foreign exchange – maybe this was the agreement with the client. In some other agreements, it’s the supplier who bears the currency risk. As you see, it all depends.

However, you need to understand how these leading companies sell. Do they sell in USD? Or do they sell in foreign currency – other than their presentation currency?

Also, may I kindly point you to their notes to the financial statements? I am pretty sure that there’s an explanation for that. S.

I am a bit confused about journalizing foreign currency transactions, let say a sale of goods in foreign currency on account.

The standard says that you translate it to functional currency by applying the spot exchange rate. The receivable is denominated in foreign currency while it is journalized in the functional currency. If it is not flagged as a receivable in foreign currency then you cannot keep keep track of the change in value do to the change of the foreign currency exchange rate. How do you specify that in the general journal? 많은 감사드립니다.

usually, as far as I know, these foreign currency items are recognized in 2 currencies in the accounting system – both functional and foreign. Of course, you see only the balance in the functional currency when looking to the general ledger, but the information should be somewhere in the system. S.

Kindly help me in regard to below query:

Treatment of FX rate variation on imported material: Kindly note that we import material e. g. from US and have SAP system in our company.

At the time of Goods Receipt system (i. e. SAP) Debit the inventory with exchange rate at the time of receipt of material and pass the entry.

Matetrial Account ——Debit (With FX rate at the time of Goods Receipt)

To GR/IR Clearing Account.

On receipt of Invoice from Vendor system pass the entry.

GR/IR Account———–Debit (With FX rate at the time of GR)

Price Rate Difference—Debit (With FX rate variation between GR and Date of Invoice Receipt)

To Vendor Account (FX Rate at the time of Invice Receipt)

My query is whether the price rate difference mentioned above should charge on the Material or directly charged in Profit & Loss Account?

the question is what the transaction date is. In my opinion it is the date when you accepted inventories, not the invoice. Therefore, the price difference should be recognized in profit or loss. You can read more about it here. The article is about the prepayments in foreign currency, but it explain quite clearly what the transaction date is and it helps you understand the issue. S.

Please consider below situation -

X Ltd is registered in Georgia (Europe) and is engaged in power business. Power is sold 20% in local georgian market and 80% in Turkey. All sales proceeds are converted in USD on receipt of revenue. The providers of capital i. e. Term loans and equity provides funds in USD.

The functional currency decided by management is Lari (Georgian Currency). Now at every end of period, outstanding loan is being revalued and the exchange difference (USD-lari) is charged to Profit & Loss Account. This exchange loss is a non-cash item because this notional loss will never impact the profitability of the company, as the loans are denominated in USD and loan liability will remain in USD.

In this situation, can Company route such exchange loss on revaluation of loans through other comprehensive income instead of hitting P&L statement.

Hi Mohit, no, I’m sorry. I understand your concerns, but if your functional currency is Lari, then you need to re-calculate and recognize the difference via P/L. S.

I work for an NPO and would like to know the treatment of exchange rate differences of funds received from donors. At the budgeting stage we use the spot rate and these budgets can be for a period of 3years and the funds received in tranches. Please advise, thank you.

we are closing year Dec 16.

we have loan from 3 bank around $ 200Mil for running operation activity. we get interest invoice every month from the bank, we recognise as expenses. kindly advise as per IFRS how to treat the actual interest cost in P&L.

Please advise about non-monetary items like advance to supplier, if I have banke letter of gurantee from supplier against advanced payment, curreny revaluation for his balance as advance is correct or not?

for advances, see above. It depends on what type of advance it is. If it’s for goods or services and you don’t assume to get the cash back, then non-monetary. S.

Please advise in case of devaluation of currency(i. e.:Egypt) of foreign entity do we still continue to translate foreign operation like we normally do (i. e.: balance sheet items at closing and income statement at average) or there is any other method to translate.

미리 감사드립니다.

devaluation itself is not a reason for different reporting. The only exception is when your economy is hyperinflationary – in this case, there are different requirements to present comparatives, etc. – there’s a specific IFRS standard for it, plus look above to the article. S.

Find your article and comments to be very useful.

My query is regarding identifying of functional currency of an entity having manufacturing facilities in one country (say – India) more of domestic raw materials (partly imports too), local labor and other expenses locally, but exporting all their products to another country (say US)- the sales being designated in the currency of the foreign country to whom exports are made (in USD)and settlements also being made in this currency (USD). A portion of the earnings maybe retained in USD balances (but in an Indian bank) from time to time – essentially based on import needs if any. The pre - IFRS practise was to traslate the USD transactions into Indian Rupee. Confused about whether USD or INR will be the functional currency in this case? Indian Rupee has to be continued as the presentation currency.

Hello Silvia M. I read all your post and convince to go for IFRS KIT. but I have few queries, It would be great if you can contact me on my or give me your ID?

당신의 응답을 기다리는.

Hi Gaurav, please try resending the message to supportifrsbox.

Amazing building of concepts through you!

I feel some confusion while accounting for the purchase of machinery for e. g from a foreign country, so if total cost is 100,000$ and terms of payment includes downpayment as an advance to supplier and 4 instalments. then how to account for this, and do the previous payments already made if talking about 3 payment, to be brought to latest forex rate and difference computed as exchange gain finally become part of the asset?

Dear Silvia Mam,

Can you please make it clear to me whether any foreign exchange differences (loss) arising out of import of capital goods bought for the start of operation of its business on its pre - operation stage can be booked or capitalized assuming it to be a pre-operating cost itself??

No, you don’t capitalize any forex gain/loss. Also, you do NOT capitalize the pre-operating costs under IFRS (unless they specifically relate to the acquisition of an item of PPE or intangible asset or other eligible asset).

We are an Online Travel Agent and acting like an agent according to; ifrsbox/ifrs-revenue-principal-agent/

Our revenue is the commission on trips (no package deals created by our company), price is determined by the actual operator.

I assume we have the focus on non-monetary customer prepayments and operator prepayments, both in foreign currencies (other than reporting currency EUR). We are allowed to recognize revenue once there is no cancellation option for the customer any more.

How to deal with the received prepayments and payments made to the final operators?

Example: (note: company has USD and EUR bank account)

Day 01 вЂ“ customer prepayment 1.000 USD вЂ“ fx to EUR = 1:1.

Day 10 вЂ“ prepayment by us to Operator 3.000 THB вЂ“ fx to EUR= 1:30.

Day 20 вЂ“ prepayment by us to Operator 20.000 THB вЂ“ fx to EUR= 1:25.

Day 30 вЂ“ cancellation date, on date of Revenue recognition:

According to IFRIC 22 (effective 01-01-2018) you should take the fx on the actual вЂњtransaction dateвЂќ. By this, it means that we will have the following result to be determined on Day 30:

Revenue customer part: 1.000 / 1 = EUR 1.000.

Revenue operator part: вЂ“ 3.000 / 30 = вЂ“ EUR 100.

Revenue operator part: вЂ“ 20.000 / 25 = вЂ“ EUR 800.

Total revenue result in the P&L to be taken / shown: EUR 100,-

No FX result should be shown in the report, based on IFRIC 22.

Is that the right conclusion? Or do you have a different opinion on this? Thanks for your support.

We are in the process of implementing Dynamics 365 and I have a question concerning Forex /PPV accounting under IFRS.

If we have our standard costs in GBP say Good A 80 GBP and we have raised a PO for 100 EUR (as it is a foreign supplier). Exchange rate at Std cost import is 0.8.

At receipt of the goods (before we receive the invoice) is 0.79.

Our postings would be: (in GBP)

Dr Inventory 80 (since we are standard costing)

Cr GRNI 79 (since в‚¬100 now equals ВЈ79 at the fx rate at receipt.

Cr ? 1 (being forex difference)

Is the Cr PPV or FX difference (bearing in mind that I think that the GRNI/PO is a non monetary item)?

미리 감사드립니다.

We are a gas distribution company and buy gas from various exploration companies. Monthly Dollar invoices are received for gas procured. We pay in Rupees.

To avoid exchange rate complications, we have entered into an agreement with the exploration comapnies such that we maintain/lock a mutually agreed exchange rate for 6 months. We therefore book our liability and make payment on such rate since its known to us.

Is IFRS 21 applicable in this scenario?

What rate should foreign currency payables/ receivables be converted at? Is it the Buying rate or Selling Rate.

If the company changed the functional currency, should we translate the comparative FS as well?

Question about the proper treatment of a construction work in progress (WIP) statement. For my question, assume that the project is being managed in a local currency different from the reporting currency.

I assume that the original contract would be valued at the contract’s inception date.

Now the project has a contract change order. I am assuming that I value the change based on its inception date.

Now the revised contract (original + change orders) would be the original contract (in reporting currency) plus the change order (in reporting currency)

Is this the correct treatment? 미리 감사드립니다!

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