1
SCOPE
TRANSLATIONS
FOREIGN CURRENCY
TRANSACTIONS
AND BALANCES EXCEPT
DERIVATIVES WITHIN
THE SCOPE OF IAS 39
&
IFRS9
HOWEVER THOSE
FOREIGN CURRENCY
DERIVATIVES OUTSIDE
IAS 39 & IFRS 9 ARE
WITHIN THIS IAS.
TRANSLATING
THE
RESULTS AND
FINANCIAL
POSITION OF
FOREIGN
OPERATIONS BY
CONSOLIDATION,
PROPTIONATE
CONSOLIDATION
OR EQUITY
METHOD
TRANSLATING AN
ENTITY’S RESULTS
AND
FINANCIAL POSIION
INTO A
PRESENTATION
CURRENCY
DEFINITIONS
CLOSING RATE-SPOT RATE AT THE END OF THE
REPORTING PERIOD
EXCHANGE DIFFERENCE-DIFFERENT EXCHANGE
RATE
EXCHANGE RATE-RATIO BETWEEN TWO
CURRENCIES
FAIR VALUE
FOREIGN CURRENCY-OTHER THAN FUNCTIONAL
CURRENCY OF THE ENTITY
FOREIGN OPERATIONS-IS AN ENTITY THAT IS
SUBSIDIARY, ASSOCIATE, JOINT VENTURE OR
BRANCH OF A REPORTING ENTITY, THE
ACTIVITIES OF WHICH ARE BASED OR
CONDUCTED IN A COUNTRY OR CURRENCY
OTHER THAN THOSE OF THE REPORTING
ENTITY

DEFINITIONS-CONTINUED
FUNCTIONAL CURRENCY IS THE CURRENCY OF THE PRIMARY
ECONOMIC ENVIRONMENT IN WHICH THE ENTITY
OPERATES
A GROUP IS A PARENT AND ITS SUBSIDIARY
MONETARY ITEMS-RIGHT TO RECEIVE OR OBLIGATION TO
DELIVER A FIXED OR DETERMINABLE NUMBER OF UNITS
OF CURRENCY.
NON MONETARY-ABSENCE OF RIGHT(NOT FOUND IN
DEFINITIONS)
NET INVESTMENTS IN A FOREIGN OPERATIONS-REPORTING
ENTITY’S INTEREST IN THE NET ASSETS OF THAT
OPERATIONS
PRESENTATION CURRENCY-IN WHICH FINANCIAL
STATEMENTS ARE PRESENTED
SPOT EXCHANGE RATE-RATE FOR IMMEDIATE DELIVERY.

HOW THIS STANDARD
IS APPLIED?
DETERMINE THE
FUNCTIONAL
CURRENCY
ACCOUNTING FOR
FOREIGN CURRENCY
TRANSACTIONS
TRANSLATION OF
FOREIGN OPERATIONS
TRANSLATION FROM
FUNCTIONAL
CURRENCY
TO PRESENTATION
CURRENCY
5
DETERMINATION OF FUNCTIONAL
CURRENCY OF THE ENTITYKEY CONSIDERATIONS
PRIMARY INDICATORS
CONCEPT OF ECONOMIC ENVIRONMENT-GENERATION AND EXPENSES OF
CASH.
DOES IT INFLUENCE THE SALE PRICE?-DENOMINATION AND SETTLEMENT.
DOES IT INFLUENCE THE COST? (LABOR, MATERIAL AND OTHER COSTS)
ADDITIONAL INDICATORS
IN WHAT CURRENCY THE FINANCING ACTIVITIES TAKE PLACE?
IN WHAT CURRENCY RECEIPTS FROM OPEATING ACTIVITIES ARE USUALLY
RETAINED.
CAN THE FUNCTIONAL CURRENCY CHANGED?-YES IF THERE IS A
CHANGE IN THOSE UNDERLYING TRANSACTIONS, EVENTS AND CONDITIONS.
DETERMINATION OF FUNCTIONAL
CURRENCY OF FOREIGN OPERATIONSKEY CONSIDERATIONS
IS FOREIGN OPERATIONS AN EXTENSION OF THE REPORTING
ENTITY RATHER THAN WITH SIGNIFICANT AUTONOMY?
WHETHER TRANSACTIONS WITH THE REPORITNG ENTITY ARE HIGH
OR LOW PROPORIION OF THE FOREIGN ENTITY’S ACTIVITIES?
WHETHER THE CASH FLOWS FROM THE FOREIGN ENTITY’S WOULD
DIRECTLY AFFECT THE CASH FLOWS OF THE REPORTING
ENTITY?
WHETHER CASH FLOWS OF FOREIGN ENTITY IS SUFFICIENT TO
SERVICE ITS EXISTING DEBT OBLIGATIONS?
IS IT CLEAR OR MIXED? USE JUDGEMENT, WHICH FAITHFULLY
REFLECTS THE ECONOMIC EFFECTS OF THE UNDERLYING
TRANSACTIONS.

FUNCIONAL CURRENCY IN A
HYPERINFLRATIARY ECONOMY IS
TO BE RESTATED IN ACCORDANCE
WITH IAS 29-FINANCIAL
REPORTING IN
HYPERINFLATIONARY ECONOMIES.

NET INVESTMENT IN A FOREIGN
OPERATION
A MONETARY ITEM FOR WHICH
SETTLEMENT IS NEITHER PLANNED
NOR LIKELY TO OCCUR IN THE
FORESEEABLE FUTURE IS, IN
SUBSTANCE, A PART OF THE
ENTITY’S NET INVESTMENTS IN
THAT FOREIGN OPERATION.
FOREIGN CURRENCY TRANSACTIONS
INITIAL RECOGNITION-WHETHER
MONETARY OR NON MONETARY
– BY APPLYING SPOT EXCHANGE RATE
AT THE DATE OF TRANSACTION.
– CAN AN AVERAGE RATE BE USED?
SETTLEMENT OF MONETART ITEMS
WITHIN THE PERIOD
GAIN OR LOSS RECOGNIZE IN P&L
10
FOREIGN CURRENCY TRANSACTIONS
AT THE END OF EACH REPORTING PERIOD
MONETARY ITEMS
– REPORT USING CLOSING RATE
– PROFIT OR LOSS ON EXCHANGE RATE
ADJUSTMENTS SHOULD BE RECOGNIZED IN
INCOME STATEMENT
NON MONETARY ITEMS
- MEASURED AT HISTORIAL COST-NO
ADJUSTMENT
- MEASURED AT FAIR VALUE-USE EXCHANGE
RATES AT THE DATE WHEN THE FV WAS
DETERMINED.
- INVENTORY/IMPAIRMENT OF ASSETS?
11

RECOGNITION OF EXCHANGE DIFFERENCES.
WHEN A GAIN OR LOSS ON A NON MONETARY
ITEM IS RECOGNIZED DIRECTLY IN OTHER
COMPREHENSIVE INCOME, ANY EXCHANGE
COMPONENT OF THAT GAIN OR LOSS SHALL BE
RECOGNIZED IN OTHER COMPREHENSIVE
INCOME. CONVERSELY, WHERE A GAIN OR LOSS
ON A NON MONETARY ITEMS IS RECOGNIZED
IN PROFIT OR LOSS, ANY EXCHANGE
COMPONENT OF THAT GAIN SHALL BE
RECOGNIZED IN PROFIT OR LOSS.
WILL THERE BE A CONVERSION IN RESPECT
NON MONETARY ITEMS?

RECOGNITION OF EXCHANGE DIFFERENCES.
EXCHANGE DIFFERNCES ARISING ON A
MONETARY ITEM THAT FORMS PART OF A
REPORTING ENTITY’S NET INVESTMENTS IN A
FOREIGN OPERATIONS SHALL BE RECOGNIZED
IN PROFIT AND LOSS ACCOUNT IN THE
SEPARATE FINANCIAL STATEMNETS OF THE
REPORTING ENTITY OR THE INDIVIDUAL
FINANCIAL STATEMENTS OF THE FOREIGN
OPERATIONS, AS APPROPRIATE.
IN THE FINANCIAL STATEMENTS THAT INCLUDE
FOREIGN OPERATIONS AND THE REPORTING
ENTITY, SUCH EXCHANGE DIFFERENCES SHALL
BE RECOGNIZED INITIALLY IN OTHER
COMPREHENSIVE INCOME AND RECLASSIFIED
FROM EQUITY TO PROFIT OR LOSS ON
DISPOSAL OF NET INVESTMENTS

CHANGE IN FUNCTIONAL
CURRENCY
WHEN THERE IS A CHANGE IN AN
ENTITY’S FUNCTIONAL CURRENCY,
THE ENTITY SHALL APPLY THE
TRANSLATION PROCEDURE
APPLICABLE TO THE NEW
FUNCTIONAL CURRENCY
PROSPECTIVELY FROM THE DATE
OF CHANGE.

TRANSLATION TO THE PRESENTATION
CURRENCY
-ASSETS AND LIABILITIES SHALL BE
TRANSLATED AT THE CLOSING RATE.
-INCOME AND EXPENSES SHALL BE
TRANSLATED AT EXCHANGE RATES AT
THE DATES OF THE TRANSACTIONS AND
(CAN THE AVERAGE RATE BE USED?)
-ALL RESULTING EXCHANGE
DIFFERENCES SHALL BE RECOGNIZED IN
OTHER COMPREHENSIVE INCOME.

TRANSLATION TO THE PRESENTATION
CURRENCY-OF A HYPERINFLATIONARY
ECONOMY
-ALL AMOUNTS (INCLUDING COMPARATIVES)
SHALL BE TRANSALTED AT THE CLOSING RATE
AT THE DATE OF THE MOST RECENT STATEMENT
OF FINANCIAL POSITION EXCEPT THAT
- WHEN AMOUNTS ARE TRANSLATED INTO THE
CURRENCY OF A NON HYPERINFLATIONARY
ECONOMY, COMPARATIVE AMOUNTS SHALL BE
THOSE THAT WERE PRESENTED AS CURRENT
YEAR AMOUNTS IN THE RELEVANT PRIOR YEAR
FINANCIAL STATEMENTS.
BEFORE APPLYING THE ABOVE, IAS 29 TO BE
APPLIED.

TRANSLATION OF A FOREIGN
OPERATIONS
-SAME PROCEDURE AS THAT OF TRANSLATION TO THE
PRESENTATION CURRENCY EXCEPT THAT


ELMINATION OF INTRA GROUP BALANCES AND
TRANSACTIONS, AFTER ADJUSTMENT OF EXCHANGE RATE
DIFFERENCES IN RESPECT OF MONETARY ITEMS.
ANY GOODWILL ARISING ON THE ACQUISITION OF A
FOREIGN OPERATION AND ANY FAIR VALUE
ADJUSTMENTS TO THE CARRYING AMOUNTS OF ASSETS
AND LIABILITIES ARISING ON THE ACQUISITION OF
THAT FOREIGN OPERATION SHALL BE TREATED AS
ASSETS AND LIABILITIES OF THE FOREIGN OPERATION.
THUS THEY SHALL BE EXPRESSED IN THE FUNCTIONAL
CURRENCY OF THE FOREIGN OPERATION AND SHALL BE
TRANSLATED AT THE CLOSING RATE

DIPOSAL OR PARTIAL DISPOSAL OF A
FOREIGN OPERATION
-THE CUMULATIVE AMOUNT OF
EXCHANGE DIFFERENCES ACCUMULATED
IN THE SEPARATE COMPONENT OF
EQUITY, SHALL BE RECLASSIFIED FROM
EQUITY TO P&L, WHEN GAIN OR LOSS
ON DISPOSAL IS RECOGNIZED.

DIPOSAL OR PARTIAL DISPOSAL OF A FOREIGN
OPERATION
-ON THE PARTIAL DISPOSAL OF A SUBSIDIARY THAT
INCLUDES A FOREIGN OPERATION, THE ENTITY SHALL
RE-ATTRIBUTE THE PROPORTIONATE SHARE OF THE
CUMULATIVE AMOUNT OF EXCHANGE DIFFERENCES
RECOGNIZED IN OTHER COMPREHENSIVE INCOME TO THE
NON-CONTROLLING INTERESTS IN THAT FOREIGN
OPERATION.
IN ANY OTHER PARTIAL DISPOSAL OF A FOREIGN
OPERATION THE ENTITY SHALL RECLASSIFY TO P&L
ONLY THE PROPORTIONATE SHALL OF THE CUMULATIVE
AMOUNT OF THE EXCHANGE DIFFERENCES RECOGNIZED
IN OTHER COMPREHENSIVE INCOME..

DISCLOSURE
-AMOUNT OF EXCHANGE DIFFERENCE
RECOGNIZED IN PROFIT OR LOSS.
-NET EXCHANGE DIFFERENCES RECOGNIZED IN
OTHER COMPREHENSIVE INCOME AND
ACCUMULATED IN A SEPARATE COMPONENT OF
EQUITY AND A RECONCILIATION BETWEEN
OPENING AND CLOSING DIFFERENCES
-IF PRESENTATION CURRENCY IS DIFFERENT
FROM FUNCTIONAL CURRENCY THAT SHOULD
BE STATED
-CHANGE IN FUNCTIONAL CURRENCY