Assets and Measurement
, Definitions:
Factors = Functional Foreign Currency - currency other than functional
underlying Currency currency.
transactions • currency that the entity primarily
. generates and expends cash Foreign operations - branch or subsidiary in another
country or different currency of the reporting entity.
Secondary Factors:
Primary Factors: • The currency in which fund Monetary items - units of currency held as assets and
• The currency that mainly from financing activities are liabilities and are to be paid or recieved in a fixed or
influences sales prices for generated. determinable number of units of currency.
goods and services • Which receipts from
• And of the country whose operating activities are Presentation currency - currency in which the financial
competitive forces and usually retained. statements are presented.
regulations mainly
determine the sales prices
• Activities that are carried out
as an extension of the reporting
IAS 21 Scope:
• IFRS 9
of its goods and services
• The currency that mainly
entity
• Transactions are of a high or
Foreign • Transactions in foreign currency’s
• Translation of Financial Statements
influences labour, material
and other costs of providing
low proportion of operations
• Foreign operation directly
Exchange Objective: how to include foreign currency transactions and
goods and services. effects cash flows of the foreign operations into the financial statements, as well as
reporting entity and are the translation of such statements.
readily available for
remittance.
Management must use judgement to determine the currency that Disclosure:
faithfully represents the effects of the transactions. • Amount of exchange differences recognised in P/L and OCI (accumulated as
Functional currency reflect the underlying transactions and conditions a, recon component in equity); excluding IFRS 9 measured at fair value.
relevant to it. • Presentation currency is different from functional, together with facts
Functional currency is not changed unless there is a change in those and reason.
• Change in functional currency (fact and reason).
underlying trasactions. • An entity can only state compliance with IFRSs if it follows all IFRS
requirements, including the correct translation methods in paragraphs 39
and 42 of IAS 21, when presenting financial statements in a currency
Monetary Items different from its functional currency.
Feature: right to receive • If an entity translates only selected items, or translates everything using
a single closing rate, without applying IFRS rules, the result does not
or an obligation to comply with IFRSs.
deliver a fixed or • When an entity presents financial data in a different currency without
determinable amounts full IFRS compliance, it must:
of units of currency. • Label the information as supplementary, not as compliant with IFRSs.
• Disclose the supplementary currency used.
• Disclose the functional currency and the translation method applied.
, General - a foreign currency transaction is one that is denominated or requires a settlement in a foreign currency.
Recognition
1. Buys or sells goods or services whose price is denominated in a foreign currency.
2. Borrows or lends funds when the amounts payable or receivable are denominated in a foreign currency.
3. Acquires or disposes of assets, or incurs or settle liabilities, denominated in a foreign currency.
Initial Measurement
Spot rate x foreign currency amount at date of transaction. -
Date when transaction first qualifies for recognition in terms of relevant IFRS.
When several exchange rates are available, the I
rate used is that which the future cash flows
represented by the transaction or balance Exchangibility bet ween
Rate that approximates the actual rate at date of transaction is often the t wo currency’s are
could’ve been settled if if those cash flows had used
occurred at the measurement date. lacking, then the rate
• Average rate for a week or month. used is the first
• Not applicable if currency fluctuates significantly subsequent rate at which
exchanges could be made.
Subsequent measurement
At the end of each reporting period:
• Foreign currency monetary items must be translated using closing rate.
• Non-monetary items that are measured in terms of historic cost in a foreign currency must be translated using the exchange rate at the date of transaction.
• Non-monetary items that are measured at fair value shall be translated using the exchange rates at the date that the fair value was measured.
Carrying Amount is determined in A non-monetary asset that is impaired: Exchange differences:
accordance with other standards. • Carrying amount = cost/ carrying amount translated at the • These are differences arising on the
• Translated in accordance with this exchange rate on the date that that amount was determined. settlement of monetary items or
standard. • NRV or RA same as above. translation.
• Comparison may lead to impairment loss being recognised in • Currency bet ween subsequent and initial is
the functional currency, but not foreign currency and vice different.
Change in function currency = versa.
translations from date of • Recognised in profit or loss.
change ONLY if there is a • Settlement occurring in same period = all
change in the underlying differences. Settlement occurring in
transactions. different period = subsequent recognition.
• Differences on non-monetary items must be
recognised in OCI or P/L dependant on the
requirement of that item.
, Definitions:
Factors = Functional Foreign Currency - currency other than functional
underlying Currency currency.
transactions • currency that the entity primarily
. generates and expends cash Foreign operations - branch or subsidiary in another
country or different currency of the reporting entity.
Secondary Factors:
Primary Factors: • The currency in which fund Monetary items - units of currency held as assets and
• The currency that mainly from financing activities are liabilities and are to be paid or recieved in a fixed or
influences sales prices for generated. determinable number of units of currency.
goods and services • Which receipts from
• And of the country whose operating activities are Presentation currency - currency in which the financial
competitive forces and usually retained. statements are presented.
regulations mainly
determine the sales prices
• Activities that are carried out
as an extension of the reporting
IAS 21 Scope:
• IFRS 9
of its goods and services
• The currency that mainly
entity
• Transactions are of a high or
Foreign • Transactions in foreign currency’s
• Translation of Financial Statements
influences labour, material
and other costs of providing
low proportion of operations
• Foreign operation directly
Exchange Objective: how to include foreign currency transactions and
goods and services. effects cash flows of the foreign operations into the financial statements, as well as
reporting entity and are the translation of such statements.
readily available for
remittance.
Management must use judgement to determine the currency that Disclosure:
faithfully represents the effects of the transactions. • Amount of exchange differences recognised in P/L and OCI (accumulated as
Functional currency reflect the underlying transactions and conditions a, recon component in equity); excluding IFRS 9 measured at fair value.
relevant to it. • Presentation currency is different from functional, together with facts
Functional currency is not changed unless there is a change in those and reason.
• Change in functional currency (fact and reason).
underlying trasactions. • An entity can only state compliance with IFRSs if it follows all IFRS
requirements, including the correct translation methods in paragraphs 39
and 42 of IAS 21, when presenting financial statements in a currency
Monetary Items different from its functional currency.
Feature: right to receive • If an entity translates only selected items, or translates everything using
a single closing rate, without applying IFRS rules, the result does not
or an obligation to comply with IFRSs.
deliver a fixed or • When an entity presents financial data in a different currency without
determinable amounts full IFRS compliance, it must:
of units of currency. • Label the information as supplementary, not as compliant with IFRSs.
• Disclose the supplementary currency used.
• Disclose the functional currency and the translation method applied.
, General - a foreign currency transaction is one that is denominated or requires a settlement in a foreign currency.
Recognition
1. Buys or sells goods or services whose price is denominated in a foreign currency.
2. Borrows or lends funds when the amounts payable or receivable are denominated in a foreign currency.
3. Acquires or disposes of assets, or incurs or settle liabilities, denominated in a foreign currency.
Initial Measurement
Spot rate x foreign currency amount at date of transaction. -
Date when transaction first qualifies for recognition in terms of relevant IFRS.
When several exchange rates are available, the I
rate used is that which the future cash flows
represented by the transaction or balance Exchangibility bet ween
Rate that approximates the actual rate at date of transaction is often the t wo currency’s are
could’ve been settled if if those cash flows had used
occurred at the measurement date. lacking, then the rate
• Average rate for a week or month. used is the first
• Not applicable if currency fluctuates significantly subsequent rate at which
exchanges could be made.
Subsequent measurement
At the end of each reporting period:
• Foreign currency monetary items must be translated using closing rate.
• Non-monetary items that are measured in terms of historic cost in a foreign currency must be translated using the exchange rate at the date of transaction.
• Non-monetary items that are measured at fair value shall be translated using the exchange rates at the date that the fair value was measured.
Carrying Amount is determined in A non-monetary asset that is impaired: Exchange differences:
accordance with other standards. • Carrying amount = cost/ carrying amount translated at the • These are differences arising on the
• Translated in accordance with this exchange rate on the date that that amount was determined. settlement of monetary items or
standard. • NRV or RA same as above. translation.
• Comparison may lead to impairment loss being recognised in • Currency bet ween subsequent and initial is
the functional currency, but not foreign currency and vice different.
Change in function currency = versa.
translations from date of • Recognised in profit or loss.
change ONLY if there is a • Settlement occurring in same period = all
change in the underlying differences. Settlement occurring in
transactions. different period = subsequent recognition.
• Differences on non-monetary items must be
recognised in OCI or P/L dependant on the
requirement of that item.
