lOMoARcPSD|8949379
IAS 21 Notes
Financial accounting 300 (University of Pretoria)
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, lOMoARcPSD|8949379
1. Introduction:
2 ways an entity can participate in foreign activities:
o Txs in a foreign currency (import/export)
o Foreign operations (branch)
Entity can choose to present FS in a foreign currency (e.g. for s/hs)
IAS 21 doesn’t apply to:
o Hedge Accounting (IFRS 9)
o Presentation in SCF
2. Definitions:
Foreign Currency
Currency other than functional currency of entity.
Functional Currency
Currency determined by primary economic environment.
Primary Economic Environment
Economic environment in which entity primarily generates & spends its cash.
Factors to determine functional currency:
Currency that influences SPs
Currency of country (whose competitive forces + regulations mainly det. SPs)
Currency mainly influences labour, material & other costs of g+s
Currency in which funds from financing activities are generated
Currency in which receipts from operating activities retained
Presentation Currency
Currency in which FS presented.
1
Downloaded by Lexi Claasen ()
IAS 21 Notes
Financial accounting 300 (University of Pretoria)
StuDocu is not sponsored or endorsed by any college or university
Downloaded by Lexi Claasen ()
, lOMoARcPSD|8949379
1. Introduction:
2 ways an entity can participate in foreign activities:
o Txs in a foreign currency (import/export)
o Foreign operations (branch)
Entity can choose to present FS in a foreign currency (e.g. for s/hs)
IAS 21 doesn’t apply to:
o Hedge Accounting (IFRS 9)
o Presentation in SCF
2. Definitions:
Foreign Currency
Currency other than functional currency of entity.
Functional Currency
Currency determined by primary economic environment.
Primary Economic Environment
Economic environment in which entity primarily generates & spends its cash.
Factors to determine functional currency:
Currency that influences SPs
Currency of country (whose competitive forces + regulations mainly det. SPs)
Currency mainly influences labour, material & other costs of g+s
Currency in which funds from financing activities are generated
Currency in which receipts from operating activities retained
Presentation Currency
Currency in which FS presented.
1
Downloaded by Lexi Claasen ()
