Tradução de forex ias

GAAP: conversão de moeda estrangeira.

Compreender o tratamento de moeda estrangeira no âmbito do FRS 102.

Tratamento contábil atual.

O SSAP 20 (aplicável a entidades não exigidas ou que optam por aplicar o FRS 23) exige que as transações em moeda estrangeira sejam convertidas na moeda local da entidade usando a taxa de câmbio à vista ou uma taxa média para um período que seja uma aproximação aproximada. Itens monetários em moeda estrangeira são reconvertidos à taxa de câmbio da data do balanço.

Itens não monetários são contabilizados pela taxa de câmbio histórica. A moeda local de uma entidade é a moeda do principal ambiente econômico no qual a entidade opera e gera fluxos de caixa. Ganhos e perdas cambiais são reconhecidos no resultado. O SSAP 20 permite que transações cobertas por um contrato a termo sejam convertidas na taxa do contrato.

Tratamento contábil segundo a IAS 102.

O FRS 102 exige que as entidades convertam inicialmente as transações em moeda estrangeira na moeda funcional de uma entidade usando a taxa de câmbio à vista, embora uma taxa média de uma semana ou mês possa ser usada se a taxa de câmbio não flutuar significativamente. Itens monetários em moeda estrangeira são subsequentemente convertidos para a moeda funcional à taxa de câmbio em vigor no final do período de relato. Itens não monetários são contabilizados pela taxa histórica e itens não monetários mensurados ao valor justo são convertidos pela taxa da data em que o valor justo é reavaliado.

A moeda funcional de uma entidade é a moeda do ambiente econômico principal no qual a entidade opera, normalmente aquela em que gera e gasta principalmente caixa. As diferenças cambiais sobre itens monetários são reconhecidas no resultado. Ganhos ou perdas cambiais sobre itens não monetários mensurados pelo valor justo são reconhecidos como parte da mudança no valor justo registrada em outros resultados abrangentes ou lucro ou prejuízo.

A IFRS 102 não inclui disposições sobre o uso de uma taxa de câmbio contratada para coincidir com uma transação comercial. Por conseguinte, os saldos abrangidos por um contrato a prazo serão reconvertidos à taxa do final do ano. Por sua vez, nos termos da IFRS 102, um contrato forward cambial será reconhecido no balanço patrimonial como um instrumento financeiro ao valor justo por meio do resultado.

No entanto, o FRS 102 permite designar um contrato a termo de câmbio como instrumento de hedge em uma relação designada para proteger o risco cambial de uma transação comercial. Nesse caso, a alteração no valor justo do contrato a termo será reconhecida em outros resultados abrangentes, na medida em que efetivamente compense o ganho ou perda de reconversão nos fluxos de caixa esperados da transação comercial.

A opção de adotar a contabilidade de hedge é, no entanto, onerosa em termos de documentação, complexidade das regras e divulgações e é improvável que seja atraente para muitas entidades. A IFRS 102 permite que uma entidade apresente suas demonstrações financeiras em qualquer moeda, uma "moeda de apresentação". Para isso, todos os itens expressos em sua moeda funcional devem ser convertidos na moeda de apresentação escolhida.

Os ativos e passivos devem ser convertidos pela taxa de câmbio no final do período de relatório, enquanto as receitas e despesas devem ser convertidas pelas taxas de câmbio no dia das transações. As diferenças cambiais resultantes da conversão de demonstrações financeiras em moeda funcional para moeda de apresentação são reconhecidas em outros resultados abrangentes.

Transição.

A seção de transição da norma é omissa no tratamento das conversões de moeda estrangeira e, consequentemente, os procedimentos gerais de transição na IAS 102 serão aplicados na adoção inicial, ou seja, os ativos e passivos serão reconhecidos, reclassificados e mensurados na data de transição de acordo. com FRS 102.

Impacto financeiro das mudanças.

Enquanto a conversão para moeda de apresentação diferente da moeda funcional de uma entidade segue um conjunto de regras separadas cujo efeito sobre as demonstrações financeiras é difícil de avaliar, o uso de uma moeda de apresentação pode ser importante para um número de entidades que, por exemplo, precisam fornecer informações financeiras comparáveis ​​a acionistas estrangeiros ou, como é frequentemente o caso para subsidiárias britânicas de um grupo estrangeiro que pode ter Sterling como moeda funcional enquanto seu grupo prepara contas em dólares americanos ou euros, precisam apresentar suas demonstrações financeiras no sistema funcional. moeda de seu pai para facilitar os procedimentos de consolidação e a comparabilidade dos resultados e posição financeira.

Em particular, a mudança para demonstrações financeiras apresentadas em outra moeda que não a Sterling pode precisar ser acordada com os credores e deve ser verificada em relação a quaisquer cláusulas restritivas. Além disso, a escolha de uma moeda de apresentação no exterior pode resultar em alterações nos resultados informados na moeda funcional de uma entidade, gerada pelas variações nas taxas de câmbio entre as duas moedas.

Tais variações podem afetar não apenas os acordos de dívida, mas também os esquemas de remuneração e de ações que podem ter sido originalmente estipulados por referência à moeda local e que precisariam ser revisados ​​para levar em conta qualquer distorção cambial. Para entidades que usam contratos de câmbio a termo para corresponder às suas transações comerciais, as alterações na IFRS 102 resultam em um tratamento de divulgação financeira mais rigoroso. Tais entidades teriam, sob o SSAP 20, reduzido sua exposição à volatilidade na conta de lucros e perdas utilizando as taxas de câmbio especificadas nos contratos a termo.

De acordo com a IAS 102, para obter um elemento de comparação de ganhos e perdas cambiais em suas transações comerciais, as entidades podem optar por aplicar a contabilidade de hedge a tais acordos de acordo com a Seção 12 da norma. No entanto, é provável que as entidades possam decidir não adotar a contabilidade de hedge porque o ônus administrativo de manter a documentação relevante e as complexidades intrínsecas da contabilidade de hedge podem superar os benefícios do tratamento contábil permitido.

As entidades que não optarem pela aplicação da contabilidade de cobertura terão, no entanto, de reconhecer contratos cambiais a prazo pelo justo valor quando são retiradas e reconhecerão ganhos e perdas de justo valor nos lucros ou prejuízos numa base contínua a cada data de relato. apenas no momento da liquidação. Por outro lado, as transacções e os itens monetários cobertos por contratos a prazo serão convertidos à taxa de câmbio da data da transacção e do final do ano, respectivamente, com as diferenças de câmbio reconhecidas nos lucros ou prejuízos. Efetivamente, este tratamento produzirá dois conjuntos de entradas em lucros ou perdas, enquanto que em SSAP 20 não teria havido nenhum.

Impacto da tributação das mudanças.

Os lucros e perdas que surgem para a empresa de seus contratos derivativos e relacionados incluem ganhos e perdas cambiais. A exceção a isso é um ganho ou perda em um derivativo que consiste total ou principalmente em moeda.

Quando uma empresa prepara suas contas em conformidade com os GAAP do Reino Unido (excluindo FRS23 e 26) e usa um contrato de moeda a termo para igualar sua exposição cambial, os movimentos cambiais decorrentes do contrato de moeda a termo elegíveis para correspondência são determinados por referência a a taxa à vista prevalecente no final do período contábil. Não é mais possível que lucros e perdas em contratos de câmbio futuros sejam deixados fora de consideração.

Detalhes do Artigo.

Data: 6 de março de 2015.

Região: Reino Unido.

Tópico: Relatórios Corporativos; Relatório financeiro; UKGAAP.

Contabilização de Pagamentos Antecipados em Moeda Estrangeira em IFRS.

As transações em moedas estrangeiras são às vezes um pesadelo.

Obviamente, estamos negociando uns com os outros, nossas próprias moedas são diferentes e as taxas de câmbio estão subindo e descendo constantemente.

Estamos todos cientes das regras básicas com relação à seleção da taxa de câmbio apropriada a ser aplicada.

Quando se trata de transações mais complicadas, é difícil aplicar as regras. Muitas vezes, recebo uma e a mesma pergunta:

“Querida Silvia, celebramos um contrato para produção e entrega de uma máquina específica para nossos negócios e pagamos o primeiro pagamento em moeda estrangeira.

Qual é a contabilização correta dos pagamentos antecipados em moeda estrangeira em IFRS? Como as IFRS tratam o efeito da mudança das taxas de câmbio? ”

Deixe-me dizer que aqui não é preto nem branco.

Depende de mais fatores, especialmente a natureza de um pré-pagamento específico.

Deixe-me explicar por que e como. E deixe-me ilustrar dois cenários diferentes nos exemplos.

O que dizem as regras?

Como traduzir Como traduzir valores em moeda estrangeira para sua moeda funcional; Como traduzir as demonstrações financeiras de uma operação estrangeira para a moeda de apresentação.

Quando você registra suas transações em uma moeda estrangeira durante o ano, então você está traduzindo os valores em moeda estrangeira para sua moeda funcional.

A norma IAS 21 prescreve:

Inicialmente, você deve recalcular todos os valores em moeda estrangeira para sua moeda funcional à taxa de câmbio à vista válida na data da transação; Subseqüentemente (ou seja, após o reconhecimento inicial), a cada fechamento ou data do relatório, você deve recalcular: Todos os itens monetários em moeda estrangeira usando a taxa de câmbio de fechamento na data de relatório; Todos os itens não monetários em moeda estrangeira, registrados ao custo histórico, usando a taxa de câmbio histórica (na data da transação); Todos os itens não monetários em moeda estrangeira registrados pelo valor justo, utilizando a taxa de câmbio na data em que o valor justo foi determinado.

Agora vamos dividi-lo

Existem dois aspectos cruciais para avaliar:

1. Data da transação.

É claro que, inicialmente, você deve usar a taxa de câmbio à vista na data da transação para a tradução.

Mas aqui - qual é a data da transação?

É a data em que a transação primeiro se qualifica para reconhecimento de acordo com as IFRS.

Claro, pode ser diferente para vários itens, por exemplo:

Para passivos financeiros: quando uma entidade se torna uma parte das disposições contratuais de um contrato; Para o ativo imobilizado: quando é provável que os benefícios econômicos futuros do ativo fluirão para a entidade e o custo é mensurável com segurança.

Embora isso pareça bastante simples, algumas dificuldades podem surgir na determinação da data da transação.

Por exemplo, você recebe mercadorias no dia 1, fatura para essas mercadorias no dia 3 e paga por essas mercadorias no dia 4 - qual é a data da transação aqui? Qual taxa de câmbio deve ser aplicada - dia 1, 3 ou 4?

Cobriremos isso em nosso exemplo, apenas continue lendo.

2. A natureza do pré-pagamento.

No que diz respeito à conversão subsequente à taxa de fecho, a IAS 21 faz a diferença entre itens monetários e itens não monetários:

Os itens monetários são convertidos usando a taxa de câmbio de fechamento; Itens não monetários NÃO são re-traduzidos, mas mantidos à taxa original ou histórica.

O pré-pagamento do seu ativo fixo é monetário ou não monetário? Bem, pode ser monetário ou não monetário!

Há uma coisa que faz a diferença:

Um direito de receber ou obrigação de entregar um número fixo ou determinável de unidades de moeda.

Os pagamentos antecipados, como tal, podem ou não ter esse recurso e você deve avaliar cada pré-pagamento individualmente e com cuidado.

Leia o contrato específico - o que ele diz? Seu pré-pagamento é reembolsável e em que condições?

Se houver uma cláusula de reembolso do depósito, qual é a probabilidade de reembolso?

Na maioria dos casos, pré-pagamentos feitos para a aquisição de ativos fixos ou quaisquer bens / serviços em geral raramente são reembolsáveis, ou a probabilidade é muito baixa.

Portanto, seu pré-pagamento para uma máquina é (na maioria dos casos) um item não monetário e, como resultado, você NÃO deve recalculá-la usando a taxa de fechamento no final do ano.

O exemplo a seguir mostrará como contabilizar um pré-pagamento para a aquisição de uma máquina, se ela for classificada como um ativo não monetário.

Exemplo 1 - Pré-pagamento para a aquisição de uma máquina.

Sua moeda funcional é EUR e você assinou um contrato para a produção de uma máquina com um fornecedor dos EUA.

O custo total de uma máquina é de USD 100 000 e você concordou em pagar em 2 partes:

Pagamento 1: USD 30 000 após a assinatura do contrato; Pagamento 2: USD 70 000 após a entrega da máquina.

As datas e taxas de câmbio relevantes são as seguintes:

Como e quando você deve contabilizar essas transações?

4 de fevereiro de 20X1: contrato assinado.

Em 4 de fevereiro de 20X1, você entrou em um contrato.

Entretanto, nenhum ativo pode ser reconhecido de acordo com a IAS 16 - Imobilizado, pois os critérios de reconhecimento não são atendidos.

Da mesma forma, é necessário avaliar se você deve reconhecer algum passivo financeiro ou não.

Na maioria dos casos, nenhum passivo financeiro relacionado a compromissos firmes é reconhecido até que os bens sejam entregues (ou enviados, dependendo dos Incoterms), e os riscos e benefícios da propriedade tenham passado.

Conclusão: não contabilização em 4 de fevereiro de 20X1.

11 de fevereiro de 20X1: Você pagou o primeiro pagamento de US $ 30.000.

Em 11 de fevereiro de 20X1, os critérios de reconhecimento para o reconhecimento de uma máquina na IAS 16 ainda não foram atendidos. Lembre-se, você não tem máquina ainda.

Neste ponto, você não pode controlar a máquina e, como resultado, “os benefícios econômicos futuros fluindo para a entidade” não são prováveis.

Eu sei que muitas empresas adotaram práticas semelhantes - elas simplesmente reservam o primeiro pagamento como débito PPE & # 8211; máquina e dinheiro de crédito. NÃO está correto, pois não há máquina.

Então, qual é a entrada correta em 11 de fevereiro de 20X1?

Ativos de débito - pré-pagamentos para imobilizado: EUR 22 403 (USD 30.000 / 1,3391)

Dinheiro de Crédito: EUR 22 403 (USD 30 000 / 1,3991)

Na prática, você usaria a taxa de câmbio dependendo das circunstâncias:

Se pagou USD 30 000 de conta em EUR: utiliza a taxa em que o seu banco recalculou a transacção; Se pagou USD 30 000 da sua conta USD: aplica uma taxa oficialmente pronunciada, por ex. taxa pelo Banco Central Europeu.

31 de dezembro de 20X1: a data do relatório.

Nesse caso, o pré-pagamento de US $ 30.000 para uma máquina não é monetário.

Isso significa que não há recálculo. A sua demonstração da posição financeira mostrará o pré-pagamento à taxa histórica, ou seja, no valor de EUR 22 403.

15 de janeiro de 20X2: Máquina entregue e propriedade transferida.

Esta é exatamente a data em que você ganha controle sobre a máquina. Neste ponto, os critérios de reconhecimento da IAS16 são atendidos e você pode reconhecer a máquina como seu próprio imobilizado.

No entanto, a fatura da parte restante de US $ 70.000 chegou em 20 de janeiro de 20X2.

Qual taxa de câmbio você deve aplicar?

Na data da transação.

Neste caso, a data da transação é 15 de janeiro de 20X2, quando uma máquina foi entregue e a entrega deu origem a um passivo financeiro.

Como resultado, sua entrada deve ser:

Activos de débito - máquina (PPE): 51 448 euros (70 000 USD / 1,3606)

Responsabilidades de crédito - fornecedores: 51 448 euros (70 000 USD / 1,3606)

Esta é uma aplicação muito rigorosa das regras da IAS 21, mas vamos ser um pouco mais práticas.

Pode ser aceitável aplicar a taxa de câmbio na data da fatura, e não na data de entrega de uma máquina, especialmente quando há apenas um pequeno atraso na emissão da fatura.

No entanto, se houver uma grande mudança nas bolsas estrangeiras, você deve realmente ficar com a data de entrega da máquina.

15 de janeiro de 20X2: E quanto ao seu pré-pagamento?

Na data de entrega da máquina, você precisa reconhecer a máquina e medi-la pelo seu custo.

Uma parte do custo da máquina é seu pré-pagamento pago após a assinatura do contrato. O custo de uma máquina também é um item não monetário - não recalculamos absolutamente nada e a mantemos em taxas históricas.

Portanto, você não recalcula nada e sua entrada é:

Ativos de débito - máquina (PPE): 22 403 EUR.

Activos de crédito - pré-pagamentos de imobilizado: 22 403 euros.

Agora você pode argumentar - mas, a data em que uma máquina aparece em suas demonstrações financeiras está na entrega, então devemos recalcular o valor total de US $ 100.000 com a taxa aplicável na entrega.

Algumas empresas aplicam esse tratamento, mas não são realmente corretas e apresentam uma visão verdadeira e justa da transação.

A verdade é que, na entrega da máquina, os critérios de reconhecimento são atendidos e você precisa reconhecer a máquina em 1 ponto.

Mas, a mensuração de seu custo é uma questão diferente.

O seu custo real incorrido é de USD 30.000 convertido com a taxa de câmbio na data do primeiro pagamento e de USD 70.000 convertido com a taxa de câmbio na data da entrega.

Por favor, apenas perceba que o pré-pagamento de USD 30.000 não é mais um ativo em USD. É o seu ativo em euros. Por quê?

Tente analisar desta forma: a maioria dos ativos não monetários deixam de ser ativos de “moeda estrangeira” no momento em que você os reconhece em suas contas. Portanto, você não tem um ativo (pré-pagamento) de US $ 30.000 em seus livros. Em vez disso, você tem um ativo (pré-pagamento) de EUR 22 403.

2 de fevereiro de 20X2: a fatura é paga.

Isso deve ser cristalino. Você registra seu pagamento com a taxa de câmbio à vista na data do pagamento e qualquer diferença é reconhecida no resultado.

Sua entrada seria:

Passivo de débito - fornecedores: 51 448 euros (70 000 USD / 1,3606)

Dinheiro em Créditos: EUR 51 860 (USD 70 000 / 1,3498)

Débito P / L - Perdas cambiais com EUR 412 (51 860 menos 51 448)

O resumo de todas as entradas contábeis está aqui:

Exemplo 2 e # 8211; Caução para aluguer de longa duração.

Sua empresa (moeda funcional: EUR) quer alugar uma propriedade em Chicago por 12 meses e paga um depósito de segurança de USD 10 000. O depósito será reembolsado no final do período de locação.

As datas e taxas de câmbio relevantes são as seguintes:

Aqui, a situação é um pouco diferente porque, como um pré-pagamento é reembolsável, é um ativo monetário.

Quando você faz um pagamento, você o traduz usando a taxa de câmbio à vista na data do pagamento.

Posteriormente, é necessário convertê-lo usando a taxa de fechamento em 31 de dezembro de 20X1 e reconhecer qualquer diferença de câmbio no lucro ou prejuízo.

Este é o resumo das entradas contábeis:

Qual é a sua própria prática contábil relacionada a depósitos, pré-pagamentos ou adiantamentos em moedas estrangeiras? E este artigo ajudou você?

Por favor, deixe-me saber em um comentário abaixo do artigo e se você conhece alguém que possa usar esta informação, por favor, compartilhe & # 8211; obrigado!

Atualização 05 de fevereiro de 2015: Houve uma grande discussão no LinkedIn em relação a este tópico. Eu respondi várias perguntas ao redor, como este é um tópico muito confuso e muitos de nós temos algumas dúvidas ao redor. Por favor, se estiver interessado, leia aqui.

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72 Comentários.

Obrigado por escrever este artigo incrível.

Por favor, responda a seguinte pergunta?

Se uma empresa investir 10 mil ações de sua subsidiária nos EUA a US $ 1 por ação, a controladora precisará recalcular o valor dessas ações em suas contas separadas na data de fechamento / relatório nos dois casos a seguir:

1. As ações são negociadas no mercado ativo;

2. Um mercado ativo não existe para ações de uma subsidiária.

Obrigado pelo comentário. Eu assumo que a moeda funcional da sua empresa NÃO é USD (caso contrário você não perguntaria).

Bem, por definição, as ações são um ativo NÃO monetário, porque não há direito de receber uma quantia fixa ou predeterminada de uma moeda.

No entanto, o recálculo depende de como você classificou essas ações em suas demonstrações financeiras.

É o instrumento financeiro? Se sim, então como você o categorizou? Se estiver no valor justo (por lucro ou perda, ou OCI) & # 8211; então sim, você recalcula essas ações pela taxa de câmbio válida na data de ajuste do valor justo. Nesse caso, as diferenças na taxa de câmbio fazem parte da reavaliação ao valor justo.

No entanto, se você mantiver as ações a preço de custo (por qualquer motivo), não o recalculará, pois é um ativo não monetário NÃO ao valor justo.

Minha querida, você tornou a contabilidade muito interessante porque simplificou as questões mais complexas e difíceis do IFRS de maneira muito simples e interessante.

Iwish sua vida longa e saudável.

No caso de Investimentos em ações ou dívidas, o local de reconhecimento da diferença Fx (P / L ou OCI) depende de sua categoria de classificação de mensuração, ou seja, Custo Amortizado, VJR ou VSOO de acordo com a IFRS 9 e HTM, VLT da AFS de acordo com a IAS 39.

Claro, mas isso não contradiz o que escrevi acima.

Obrigado Silva por este esforço educativo. Uma empresa acumula renda de aluguel que cobra em uma moeda diferente mensalmente, porque prepara suas contas de gerenciamento mensalmente. Isso é um item monetário ou não monetário? Qual taxa de câmbio deve usar? A empresa precisa traduzir novamente este item na data do relatório? Devo acrescentar que os inquilinos não pagam necessariamente antes de se mudarem para as instalações. Quando eles eventualmente pagam, como você o trata?

essa questão não é tão fácil quanto parece, e, de fato, há muitos pontos de vista sobre ela. Portanto, a IFRS Foundation adicionou-a à agenda e formulará algumas conclusões. Na prática, o tratamento varia, entidade por entidade, nação por nação.

Se você estiver interessado, por favor, leia este documento publicado em novembro de 2014 pela Fundação IFRS, que lhe dará algumas abordagens. (Se o link não funcionar, copie-o para seu navegador: media. ifrs / 2014 / IFRIC / November / IFRIC-Update-November-2014.html # E)

Obrigado Caro Silvia, eu tenho uma pergunta, sobre a apresentação de pré-pagamentos, quando você alocou? Revisei os ifrs, e não os encontrei especificamente, apenas o IAS 1, mencionado sobre materialidade na apresentação,

Por exemplo, no Peru, se você tem um pagamento antecipado sobre o imobilizado, você deve apresentar que, como o imobilizado, é semelhante se você tiver um pagamento antecipado sobre o estoque que você deve apresentar como estoque, está correto com o IFRS ??

infelizmente, não há orientação específica sobre esse assunto, portanto, precisamos aplicar as regras gerais da IAS 1.

Como o pré-pagamento é de longo prazo (você não espera recuperá-lo dentro de 12 meses e ele retornará ao PPE um dia), eu realmente o apresentaria na linha separada em seu PPE & # 8211; como "pré-pagamentos" para a aquisição de PPE & # 8221 ;. Isto é também o que nossa legislação exige. Para mim, é mais apropriado mostrá-lo ao lado de EPIs, em vez de em algum lugar nos empréstimos de longo prazo, contas a receber ou algo assim. Tenha um bom dia! S.

obrigado pelo artigo.

Eu tenho uma pergunta um pouco diferente, porque eu tenho uma fatura chf reservada em 2014 para despesas em 2015, comprada usando uma conta bancária chf com CHF comprada em 2014 para pagar a fatura da CHF em dezembro de 2014.

Nós contabilizamos na GBP ser uma empresa do Reino Unido.

A fatura é uma assinatura do ano civil de 2015.

Para fixar o custo para 2015 em gpb, compramos chf em outubro de 2014 para pagar a fatura em CHF.

Nós pagamos a fatura em dezembro de 2014.

contabilizamos a fatura chf usando o chf no banco e colocamos o custo da fatura usando o banco chf em pré-pagamentos no final de dezembro de 2014, com a visão de que esse custo será distribuído ao longo de 2015 de maneira uniforme. O custo do pré-pagamento é igual ao custo do CHF pago pelo banco CHF.

Efetivamente, usamos a taxa média como proxy para a taxa à vista para registrar a fatura chf.

Os chf comprados para pagar a fatura foram contratados pela taxa dada e comprada do banco.

contabilizamos o pagamento do fornecedor usando a taxa média como proxy da taxa à vista para pagar a fatura da conta do fornecedor.

Todos os fx na conta de banco e fornecedor chf foram para a P & amp; L e, em seguida, passaram a receber pagamentos antecipados, de modo que o custo de pré-pagamento era o custo de compra da CHF.

A empresa sempre explicou isso dessa maneira, mas há pouca orientação para esse tipo de situação em ifrs e gostaria de alguns conselhos.

Quais são seus pontos de vista?

A imparidade pode ser registada em activos não monetários (imobilizado nos termos da IAS 16) apenas devido à flutuação da taxa de câmbio?

De acordo com o ASC 255-10-55-1, os adiantamentos a fornecedores que não estão relacionados a um contrato de preço fixo são considerados direitos de receber crédito por uma quantia em dinheiro, e não reivindicações a uma quantidade especificada de bens ou serviços e são considerados itens monetários. Em contrapartida, os adiantamentos não reembolsáveis ​​a fornecedores relacionados a um contrato de preço fixo são classificados como itens não monetários porque são efetivamente pedidos de bens e serviços futuros e são registrados usando a taxa de câmbio histórica.

Você acredita que o acima é uma diferença entre os GAAP dos EUA e as IFRS?

Obrigado por um artigo bom e útil.

Gostaria de fazer uma pergunta sobre os adiantamentos recebidos. Devemos também reavaliar os avanços recebidos em moeda estrangeira de nossos clientes?

Na minha opinião, até que a conclusão seja alcançada, eu avaliaria se esses adiantamentos recebidos são reembolsáveis ​​ou não. Se eles são reembolsáveis ​​e é provável que eles serão reembolsados, então sim, eu iria revalorizá-los. Mas se eles não são reembolsáveis, então eu não os trataria como passivo monetário e não iria reavaliar.

Muito obrigado .. Eu estava procurando a resposta de um longo tempo.

Obrigado pelo seu artigo super útil. No entanto, tenho uma pergunta. Vamos dizer que uma máquina custa US $ 100,00 e o cronograma de pagamento é:

11 de fevereiro de 20X1: Pré-pagamento 1: US $ 30.000.

15 de janeiro de 20X2: Pagamento 2: US $ 50.000 (entregue em máquina)

15 de fevereiro de 20X2: Pagamento final: US $ 20.000.

Qual seria o tratamento contábil para a máquina nesse caso? Registramos o valor total do imobilizado em US $ 100.000 em 15 de janeiro de 20X2 ou debitamos o PPE em apenas US $ 80.000?

Agradeço antecipadamente.

você deve debitar o custo total e o valor não pago ao passivo.

Oi, obrigado pela sua pronta resposta.

Então, precisamos debitar o valor total de EPI na data em que a máquina foi entregue? E também creditar o montante de pré-pagamento de US $ 30.000 que fizemos em 11 de fevereiro de 20X1? E se o próximo pagamento de US $ 20.000 em 15 de fevereiro de 20X2 só for faturado nesse dia?

Estou um pouco confuso porque pensei que o passivo / AP só seria registrado depois que a fatura fosse recebida.

Agradeço antecipadamente.

Na verdade, você tem alguma responsabilidade quando recebe um EPI. Mas seja um pouco prático & # 8211; Eu não acho que os dias realmente importam se o espaço entre eles não é tão grande.

Oi, posso fazer outra pergunta por favor?

Não existe o PPE pré-pago e as contas Cr pagas, certo? Alguns argumentariam que isso é "AP". não atende aos critérios de responsabilidade estabelecidos em IFRS, mas para mim é muito bom, como.

Um passivo é uma obrigação presente da entidade resultante de eventos passados, cuja liquidação se espera que resulte na saída de recursos da entidade que incorporam benefícios económicos. & # 8211; Então, neste caso, um evento passado poderia ser o contrato para comprar o EPI assinado e a fatura enviada?

Muito obrigado !

Mas o problema é que você não tem EPI pré-pago, já que não pagou em dinheiro. Na prática, as faturas para pagamentos adiantados não são reconhecidas, porque aumentariam artificialmente os ativos e os passivos. De qualquer forma, se você tem um contrato como seu evento passado + fatura, e você não vai pagar isso, então você deve reconhecer um passivo pela penalidade 😉 S.

Obrigado pelo seu artigo útil.

Eu usando o modelo de avaliação em PPE e o ganho reconhecido em OCI.

Isso se aplica a todos os itens não monetários em moeda estrangeira registrados pelo valor justo utilizando a taxa de câmbio na data em que o valor justo foi determinado?

se não por favor me dê exemplo.

Se o pagamento antecipado em moeda estrangeira não for para imobilizado, e sim uma despesa, por exemplo, pagamos uma despesa de aluguel em 20 de dezembro de 2015, por ser um item não monetário, para que não recalculemos no final de 20 de dezembro de 2015, quando registrarmos a despesa de aluguel em 20 de janeiro (despesa de locação da Dr. / pré-pagamento de Cr.), a despesa será mostrada na taxa histórica. (20 de dezembro & # 215; 1), está correto?

Muito obrigado!!

Obrigado pela explicação clara sobre contabilidade e.

É um artigo monetário quando eu recebi um avanço para o pacote de excursão do cliente.

Oi Akshan, com pré-pagamentos, não é claro e você precisa avaliar cada pré-pagamento com cuidado. Por exemplo. Se o adiantamento para o pacote turístico não for reembolsável, ele indica que não é monetário. Por favor, leia mais aqui: ifrsbox / monetário-não monetário / S.

Isso está claro para mim se o caso é AUC (ativo em construção).

Como sobre a aquisição de inventário (bens comerciais)?

a taxa histórica do pré-pagamento é aplicada ao custo do estoque?

Artigo fantástico. A partir de agora eu sou fã de coração. Seu artigo me motivou a fazer mais pesquisas.

Gostaria de lhe perguntar sobre o tratamento em moeda estrangeira do pagamento adiantado ao fornecedor para várias faturas. como o pagamento não se refere à factura única, algum tempo esta conta de fornecedor tem saldo de débito em algum momento saldo de crédito. Temos relacionamento familiar com o fornecedor e ter confiança nele .. para fornecer produto acabado que exigiu muitas etapas por exemplo impressão, embalagem e amp ; material em si, etc, para dar-lhe conforto pagamos principalmente montante adiantado (não se referem a uma única factura) para que ele possa usá-lo para produzir produto acabado.

Estou confuso que taxa de câmbio para usar. posso usar taxa média e como?

Eu tenho uma pergunta, se a despesa pré-paga como seguro pré-pago, será item monetário? e como isso afeta o ganho / perda na conversão de moeda?

As despesas antecipadas podem ser registradas como ativos intangíveis que são ativos não monetários.

Obrigado por este ótimo artigo, trazendo clareza. Seria bom se você pudesse fazer outro write-up com ilustração para o oposto de acima (Tratamento de Adiantamento / Depósitos recebidos).

Eu trabalho para um escritório de advocacia e contas de clientes de lado que é direto eu gostaria de saber o seguinte:

1. É aceitável reconhecer ou rastrear um ativo / passivo não monetário em moeda transacional (forex) à taxa à vista, mesmo que eles não estejam sujeitos à conversão no final do ano?

2. Nos escritórios de advocacia, temos Desembolsos em WIP (também conhecidos como Desembolsos Não Faturados) que estariam em andamento à medida que o assunto procede e que incluiriam muitas entradas com várias moedas transacionais. Minha prática atual é reconhecer esses ativos WIP no valor de custo histórico. Deveria, em vez disso, ser reconhecido como ativo monetário e ser sujeito a tradução no final do ano? Os problemas aqui: teríamos desembolsos em moeda local, bem como desembolsos forex: em seguida, além disso, não sabemos se o faturamento para esses desembolsos no futuro (especialmente após o final do ano) seria em moeda local ou forex.

3. Também temos o conceito de General ou Office Retainer, que são essencialmente créditos ou Recibos não aplicados ou os denominamos Depósitos Antecipados em relação a questões. Em G / L, estes são créditos na conta de ativos de desembolsos WIP.

Por favor, ignore o post acima. Eu gostaria de substituir o post acima com o seguinte:

Obrigado pelo ótimo artigo. Talvez você possa fazer outro artigo sobre o tratamento dos avanços recebidos.

Eu preciso do seu cérebro no seguinte problema.

Eu trabalho para um escritório de advocacia e temos contas de clientes e contas do Office para assuntos de clientes. Meus problemas em contas de escritório:

1. Teríamos desembolsos não faturados (conta WIP Asset) que poderíamos incorrer em moeda local, forex ou mista em clientes & # 8217; assuntos. São esses itens monetários?

2. Não há problema em controlar as divisas estrangeiras incorridas Desembolsos não faturados no momento da transação no forex, mesmo que sejam considerados itens não monetários?

3. Se acompanharmos os Desembolsos Não Faturados incorridos em seus valores forex, e eles são considerados não-monetários (e não traduzidos no final do ano), e eles precisam ser faturados no forex conforme a moeda de faturamento é estabelecida após o final do ano, como nós lidamos com isso?

4. Também teríamos Depósitos Antecipados (nós os chamamos de Retentores Gerais ou Créditos Não Aplicados) recebidos em moeda estrangeira, local ou mista, a serem aplicados a cobranças futuras em clientes & # 8217; assuntos. Estes são créditos para a conta WIP Asset. São esses itens monetários?

5. É correto rastrear os Depósitos Antecipados em moeda estrangeira recebidos no momento da transação no forex, mesmo que sejam considerados itens não monetários?

6. Se rastrearmos Depósitos Antecipados em moeda estrangeira recebidos em seus valores de forex, e eles forem considerados não monetários (e não traduzidos no final do ano), e eles precisam ser reconhecidos em forex e creditados contra notas fiscais de moeda (A / R) durante o tempo de faturamento, como lidamos com isso?

Oi obrigado pela sua informação.

Eu tenho uma pergunta. Se uma empresa é uma vendedora de imóveis e recebe pagamento adiantado pela sua construção, registra o adiantamento para a receita não auferida. Recebem adiantado com outras moedas não funcionais. Eles precisam executar a taxa de câmbio e calcular a perda de ganho cambial para a receita não auferida?

E quanto aos adiantamentos não reembolsáveis ​​aos fornecedores para comprar matérias-primas de fabricação, é item monetário ou não monetário dado o fato de que dá à empresa o direito de pagar menos do que o valor total da fatura, ou seja, Menos unidades monetárias!

Eu tenho uma pergunta. Qual é o tratamento do saldo de crédito com o fornecedor? Se o custo do pedido for de USD 50.000, remeteremos 75.000 para o fornecedor, 50.000 para o pedido já efetuado e 25.000 para pedidos futuros. fim do ano financeiro empresa não colocar qualquer nova ordem nesse caso 50.000 é pagamento antecipado ao fornecedor sendo item não-monetário nenhuma tradução necessária. mas que sobre 25.000 contra o qual não temos colocado qualquer ordem até a data do balanço. seu saldo de crédito com fornecedor. Devemos usar a taxa de câmbio de fechamento como um item monetário.

Estamos na indústria de viagens e, com freqüência, estamos pagando antecipadamente para as companhias aéreas. Podemos reconhecer esses adiantamentos como ativos monetários ao final de cada mês?

Eu acho que esses avanços não são monetários, como na maioria dos casos, o serviço segue (e não o reembolso do adiantamento de volta para você). S.

Obrigado pela sua valiosa resposta.

Obrigado pela explicação. I’ve got the following problem:

Company 1 is ordering materials from company 2 and performs a prepayment (non-monetary goods so it should not be revalued). Both companies belong to the same owner.

Each company uses a different functional currency, the transaction happens in the reporting currency of the holding both companies belong to. Over time (with changing exchange rates) the balances of those two companies don’t match anymore. How can this difference be handled?

I would just like to ask what if the company pays an insurance policy with a premium of 50,000, for example on June 1 but the coverage period only starts on June 15. How do you record it on both dates?

As you have explained that prepayment against capital items are primarily non-monetary on the pretext that they are non refundable in nature. However, if such advance is secured in nature e. g. against 100% bank guarantee which can be invoked in case of failure of delivery of PPE and amount can be recovered. In this case, can such advance be treated as monetary item and can be translated at closing rate??

Rosh, again, what is the probability of failure of delivery of PPE? I think that the bank guarantee does not change a character of the advance – it is still non-monetary. S.

Very critical and interested topic.

You’re highly capable in delivering and summarizing ideas.

Thank you for your lesson and explain. it is very apparent.

I would like to ask whether prepayments of service fees is non monetary asset, what rate to use, and for the amortization of this asset what rate should I use. Obrigado.

Dear Jarra, it is very similar as for any asset you acquire. In most cases, these prepayments are non-monetary as there is no right to receive cash. S.

are dividends paid after oci or before.

Is advance given to agents for making payments of expenses on our behalf to be considered as monetary asset?

it depends on the type of the advance. Sometimes it’s monetary and sometimes it’s non-monetary, depending on the terms agreed between the two parties (especially right of refund, its probability, etc.). I would say that in your case, it is non-monetary, because you are expecting some services to be delivered (and not cash back). Please, read more about it here. S.

is post employment benefit asset monetary item?

This is really an awesome article, thanks a million.

But my concerned is the advance or first payment made. There is no reference to the supplier account to whom the payment was made. The entries was; Debit Asset-prepayment PPE and Credit Cash. Whereas the final payment was booked in supplier account with the effect that only that portion of the total Asset value shown in supplier account in the book of the company.

In the final analysis, the supplier account in the company book does not give the total value of the Asset supplied to or purchased by the company.

Can you please, clarify this.

I would be grateful to get your advice in dealing with the scenario where we have prepaid to rent an office premises overseas in USD for 1 year, and are expensing the monthly charges in USD, however our reporting currency is GBP, and due to the fluctuation of currency over the period the GBP value at the end of the year is distorted.

Is it allowable to revalue the prepayment balance for the year end financial statements even though this is a non-monetary asset?

In some other examples the closing prepayment has a positive balance in USD, but a negative value in GBP.

your balance in GBP should not be negative. It should equal the balance of the remaining rent to be spend in USD translated by the historical rate.

In fact, when you were expensing monthly charges in USD, you should have translated these charges by the historical rate GBP/USD, not the actual rate at the time of expense. The reason is that this prepayment is a non-monetary asset (no right to receive cash, but service) and your real expense in GBP is exactly what you paid at the time of making the prepayment. S.

We are in the US and Foreign Company prepaid for royalties, though in the contract the money is refundable. Each month the royalties are calculated and subtracted from the prepay.

Should the monthly royalty payments be determined using the historic currency rate or should they be calculated using the current currency rate?

Obrigado pela ajuda!

Caitlin, this is really unsolved area in IFRS. In general, I would treat it as non-monetary item, based on the probability of their refund. S.

Can you please help me on the below?

The reporting currency is USD.

We purchase something and the vendor issues its invoice in EUR.

When we record the liability we use the official EUR/USD rate of the local bank of issue.

Some days later, when we pay off the liability, we evaluate the payment on Reuters daily EUR/USDrate.

There is know linkage between Reuters and the local bank of issue.

Can we follow this practice (evaluating the liability and the payment based on completely different financial institutes’ FX rates as a mix) or we should record the selected financial institute as FX rate source in our Accounting Policy?

I have reviewed IAS 21 but cannot find a clear instruction.

Please, when you answer, insert the relevant IFRS regulation reference as well.

Muito obrigado antecipadamente.

Sorry, ‘there is no linkage’ is the correct expression.

IAS 21 does not state precisely what rate you should use – whether Reuters, or the local bank’s rate. However, IAS 21 in par. 26 says that you should use the rate at which the future cash flows of the relevant transaction will be settled. As a result, using the local bank’s rate for recording the liability is OK, but I have doubts about translating the payments by the Reuters rate, because the payments are mostly settled using the bank’s commercial rates, too. S.

Obrigado pela resposta.

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)

Dia 01 e # 8211; customer prepayment 1.000 USD – fx to EUR = 1:1.

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

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

Day 30 – cancellation date, on date of Revenue recognition:

According to IFRIC 22 (effective 01-01-2018) you should take the fx on the actual “transaction date”. 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: – 3.000 / 30 = – EUR 100.

Revenue operator part: – 20.000 / 25 = – 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.

Silvia? Hope you will find some time to support / challange my confidence in the case above….. Will be highly appreciated. Thnx in advance!

Thanks Silvia, I need to know exactly is advances from clients for proved services or goods in monetary or not (reevaluated at the end of period or not)

talking the possibility to canceled the contract and refund the amount of advance to client.

Obrigado por este artigo. This is very informative.

But I just want to ask if the monthly restatement the monetary amount necessary? For example, our functional currency is in Yen, and we have a Cash in Bank in USD? Is it necessary to restate our USD to Yen monthly using the month end rate?

Your reply will be very helpful to us and this will be highly appreciated.

Hi Jack, well, IFRS do not prescribe monthly restatement. Technically speaking no, you don’t have to do it – but, if you prepare monthly reports under IFRS, then yes, you have to do it, because otherwise your reports would not be IFRS compliant.

Hi Silvia, thank you for your reply.

Eu tenho duas perguntas:

1) Why are non refundable prepayments non-monetery? Is it because no cash element is present in the transaction.

2) For Monetary & Non-Monetary transactions, is cash an essential factor because there could be settlements/realization made in other than cash too such as buy backs by issuing fresh equity.

I would be grateful if you may answer at the earliest.

Thank you for the article.

I have a question about revaluation of prepaid expenses. The scenario involves prepayments for IRU contracts (indefeasible right of use). When it comes to IRU contract, usually the customer is making one large prepayment in the begging of the contract for obtaining right of use of dark fiber line for a long period (10-15 years).

Our functional currency is EUR, but on some occasions, the prepayments are made in USD.

A basic scenario is when the advance is paid in the beginning involving one total amount. For example, we pay an advance of USD 10 million for 10 years IRU contract. Here we have advance of USD 10 million, equal to EUR 8.5 million (randomly selected fx rate USD 1.176/EUR). The prepayment is not refundable and as such I assume that the advance should not be revalued at each year end.

In this case we will recognize an annual expense of EUR 850 k.

However, for some contracts, the payments are made with few installments, rather than having one lump payment in the beginning.

The same scenario as above – 10 years IRU contract amounting to USD 10 million (the amount is not refundable). The payment schedule is as follows:

In the beginning of year 1, we pay USD 4 million.

In the beginning of year 2, we pay USD 4 million.

In the beginning of year 3, we pay USD 2 million.

In this case, for each payment, we have different fx rate for USD/EUR.

Could you share your thoughts about the second example. Should we revalue the advances at the year end. Further, how to estimate what EUR amount we should recognize as expense each year?

Agradeço antecipadamente.

very interesting question. In this case, I would not revalue it either, because this is still non-monetary advance (no right to receive cash). As for the expense in EUR, I would estimate it using weighted average method. Actually, there’s no guidance about this specific case in IFRS, so you need to develop your own methods. Simply, in the year 1, you have no choice than use the historical rate of the 1st payment. In the end of the year 2, you can estimate the weighted average of the remaining 3 mil. from the 1st payment and 4 mil. from the 2nd payment and translate with that rate. Você entendeu. Alternatively, maybe FIFO method would be acceptable, too. Use the rate of payment 1 for the expense in the years 1-4, rate of payment 2 for the expense in the years 5-8 and rate of payment 3 for the expense in the years 9-10. Espero que isto ajude! S.

Thank you, Silvia, for the swift reply. It was very helpful.

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Visão geral.

IAS 21 The Effects of Changes in Foreign Exchange Rates outlines how to account for foreign currency transactions and operations in financial statements, and also how to translate financial statements into a presentation currency. An entity is required to determine a functional currency (for each of its operations if necessary) based on the primary economic environment in which it operates and generally records foreign currency transactions using the spot conversion rate to that functional currency on the date of the transaction.

IAS 21 was reissued in December 2003 and applies to annual periods beginning on or after 1 January 2005.

History of IAS 21.

Interpretações Relacionadas.

IFRIC 16 Cobertura de um Investimento Líquido numa Operação Estrangeira IFRIC 22 Operações com Moeda Estrangeira e Apreciação Antecipada SIC-30 Moeda de Relato - Conversão de Moeda de Mensuração para Moeda de Apresentação. SIC-30 was superseded and incorporated into the 2003 revision of IAS 21. SIC-19 Reporting Currency – Measurement and Presentation of Financial Statements under IAS 21 and IAS 29 . SIC-19 was superseded and incorporated into the 2003 revision of IAS 21. SIC-11 Foreign Exchange – Capitalisation of Losses Resulting from Severe Currency Devaluations . SIC-11 was superseded and incorporated into the 2003 revision of IAS 21. SIC-7 Introduction of the Euro.

Amendments under consideration by the IASB.

Summary of IAS 21.

Objetivo da IAS 21.

The objective of IAS 21 is to prescribe how to include foreign currency transactions and foreign operations in the financial statements of an entity and how to translate financial statements into a presentation currency. [IAS 21.1] The principal issues are which exchange rate(s) to use and how to report the effects of changes in exchange rates in the financial statements. [IAS 21.2]

Key definitions [IAS 21.8]

Functional currency: the currency of the primary economic environment in which the entity operates. (The term 'functional currency' was used in the 2003 revision of IAS 21 in place of 'measurement currency' but with essentially the same meaning.)

Presentation currency: the currency in which financial statements are presented.

Exchange difference: the difference resulting from translating a given number of units of one currency into another currency at different exchange rates.

Foreign operation: a subsidiary, associate, joint venture, or branch whose activities are based in a country or currency other than that of the reporting entity.

Basic steps for translating foreign currency amounts into the functional currency.

Steps apply to a stand-alone entity, an entity with foreign operations (such as a parent with foreign subsidiaries), or a foreign operation (such as a foreign subsidiary or branch).

1. the reporting entity determines its functional currency.

2. the entity translates all foreign currency items into its functional currency.

3. the entity reports the effects of such translation in accordance with paragraphs 20-37 [reporting foreign currency transactions in the functional currency] and 50 [reporting the tax effects of exchange differences].

Foreign currency transactions.

A foreign currency transaction should be recorded initially at the rate of exchange at the date of the transaction (use of averages is permitted if they are a reasonable approximation of actual). [IAS 21.21-22]

Em cada data de balanço subsequente: [IAS 21.23]

foreign currency monetary amounts should be reported using the closing rate non-monetary items carried at historical cost should be reported using the exchange rate at the date of the transaction non-monetary items carried at fair value should be reported at the rate that existed when the fair values were determined.

Exchange differences arising when monetary items are settled or when monetary items are translated at rates different from those at which they were translated when initially recognised or in previous financial statements are reported in profit or loss in the period, with one exception. [IAS 21.28] The exception is that exchange differences arising on monetary items that form part of the reporting entity's net investment in a foreign operation are recognised, in the consolidated financial statements that include the foreign operation, in other comprehensive income; they will be recognised in profit or loss on disposal of the net investment. [IAS 21.32]

As regards a monetary item that forms part of an entity's investment in a foreign operation, the accounting treatment in consolidated financial statements should not be dependent on the currency of the monetary item. [IAS 21.33] Also, the accounting should not depend on which entity within the group conducts a transaction with the foreign operation. [IAS 21.15A] If a gain or loss on a non-monetary item is recognised in other comprehensive income (for example, a property revaluation under IAS 16), any foreign exchange component of that gain or loss is also recognised in other comprehensive income. [IAS 21.30]

Conversão da moeda funcional para a moeda de apresentação.

Os resultados e a posição financeira de uma entidade cuja moeda funcional não é a moeda de uma economia hiperinflacionária são convertidos para uma moeda de apresentação diferente, utilizando os seguintes procedimentos: [IAS 21.39]

assets and liabilities for each balance sheet presented (including comparatives) are translated at the closing rate at the date of that balance sheet. This would include 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 are treated as part of the assets and liabilities of the foreign operation [IAS 21.47]; income and expenses for each income statement (including comparatives) are translated at exchange rates at the dates of the transactions; and all resulting exchange differences are recognised in other comprehensive income.

Special rules apply for translating the results and financial position of an entity whose functional currency is the currency of a hyperinflationary economy into a different presentation currency. [IAS 21.42-43]

Where the foreign entity reports in the currency of a hyperinflationary economy, the financial statements of the foreign entity should be restated as required by IAS 29 Financial Reporting in Hyperinflationary Economies , before translation into the reporting currency. [IAS 21.36]

The requirements of IAS 21 regarding transactions and translation of financial statements should be strictly applied in the changeover of the national currencies of participating Member States of the European Union to the Euro – monetary assets and liabilities should continue to be translated the closing rate, cumulative exchange differences should remain in equity and exchange differences resulting from the translation of liabilities denominated in participating currencies should not be included in the carrying amount of related assets. [SIC-7]

Disposal of a foreign operation.

When a foreign operation is disposed of, the cumulative amount of the exchange differences recognised in other comprehensive income and accumulated in the separate component of equity relating to that foreign operation shall be recognised in profit or loss when the gain or loss on disposal is recognised. [IAS 21.48]

Efeitos tributários das diferenças cambiais.

These must be accounted for using IAS 12 Income Taxes .

Divulgação.

The amount of exchange differences recognised in profit or loss (excluding differences arising on financial instruments measured at fair value through profit or loss in accordance with IAS 39) [IAS 21.52(a)] Net exchange differences recognised in other comprehensive income and accumulated in a separate component of equity, and a reconciliation of the amount of such exchange differences at the beginning and end of the period [IAS 21.52(b)] When the presentation currency is different from the functional currency, disclose that fact together with the functional currency and the reason for using a different presentation currency [IAS 21.53] A change in the functional currency of either the reporting entity or a significant foreign operation and the reason therefor [IAS 21.54]

Quando uma entidade apresentar as suas demonstrações financeiras numa moeda que seja diferente da sua moeda funcional, pode descrever essas demonstrações financeiras como cumprindo a IFRS apenas se cumprirem todos os requisitos de cada Norma aplicável (incluindo a IAS 21) e cada Interpretação aplicável. [IAS 21.55]

Convenience translations.

Sometimes, an entity displays its financial statements or other financial information in a currency that is different from either its functional currency or its presentation currency simply by translating all amounts at end-of-period exchange rates. This is sometimes called a convenience translation. A result of making a convenience translation is that the resulting financial information does not comply with all IFRS, particularly IAS 21. In this case, the following disclosures are required: [IAS 21.57]

Clearly identify the information as supplementary information to distinguish it from the information that complies with IFRS Disclose the currency in which the supplementary information is displayed Disclose the entity's functional currency and the method of translation used to determine the supplementary information.

Links Rápidos.

Notícias relacionadas.

New Interpretation on foreign currency transactions and advance consideration.

19º Relatório de Decisões de Execução da ESMA divulgado.

We comment on two IFRIC draft Interpretations.

O EFRAG apoia as conclusões no DI / 2015/2.

IFRS Interpretations Committee publishes draft interpretation on foreign currency transactions and advance consideration.

Summary of November GPF meeting now available.

Publicações Relacionadas.

Deloitte comment letter on IFRIC draft Interpretation 2015/2 — Foreign currency transactions and advance consideration.

IFRS in Focus — IFRS Interpretations Committee issues draft interpretation on foreign currency transactions and advance consideration.

Deloitte comment letter on tentative agenda decision on IAS 21 — Foreign exchange restrictions and hyperinflation.

Deloitte e-learning — IAS 21.

Interpretações Relacionadas.

IFRIC 16 - Hedges de um investimento líquido em uma operação estrangeira.

IFRIC 22 — Foreign Currency Transactions and Advance Consideration.

SIC-7 — Introduction of the Euro.

SIC-11 — Foreign Exchange - Capitalisation of Losses Resulting from Severe Currency Devaluations.

SIC-19 - Moeda de Relato - Medição e Apresentação das Demonstrações Financeiras de acordo com a IAS 21 e a IAS 29.

Projetos relacionados.

Conversão de moeda estrangeira.

IAS 21 — Foreign currency transactions and advance consideration.

IAS 21 — Hedging a net investment.

Improvements to existing International Accounting Standards (2001-2003)

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IAS 21 The Effects of Changes in Foreign Exchange Rates.

The truth is that we, people, don’t want to stay isolated. We love to sell, buy, import, export, trade together and do many other things, all in foreign currencies!

When you look at the business world, you’ll see that business go global in two ways: they either have individual transactions in foreign currencies, or when they grow bigger, they often set up foreign operations (separate business abroad).

Moreover, the exchange rates change every minute. So how to bring a bit of organization into this currency mix-up? That’s why there is the standard IAS 21 The Effects of Changes in Foreign Exchange Rates.

What is the objective of IAS 21?

The objective of IAS 21 The Effects of Changes in Foreign Exchange Rates is to prescribe:

How to include foreign currency transactions and foreign operations in the financial statements of an entity; and How to translate financial statements into a presentation currency .

In other words, IAS 21 answers 2 basic questions:

What exchange rates shall we use? How to report gains or losses from foreign exchange rates in the financial statements?

Functional vs. Presentation Currency.

IAS 21 defines both functional and presentation currency and it’s crucial to understand the difference:

Functional currency is the currency of the primary economic environment in which the entity operates. It is the own entity’s currency and all other currencies are “foreign currencies”.

Presentation currency is the currency in which the financial statements are presented.

In most cases, functional and presentation currencies are the same.

However, an entity can decide to present its financial statements in a currency different from its functional currency – for example, when preparing consolidation reporting package for its parent in a foreign country.

Also, while an entity has only 1 functional currency, it can have 1 or more presentation currencies, if an entity decides to present its financial statements in more currencies.

You also need to realize that an entity can actually choose its presentation currency , but it CANNOT choose its functional currency. The functional currency needs to be determined by assessing several factors.

How to determine functional currency.

The most important factor in determining the functional currency is the entity’s primary economic environment in which it operates. In most cases, it will be the country where an entity operates, but this is not necessarily true.

The primary economic environment is normally the one in which the entity primarily generates and expends the cash . The following factors can be considered:

What currency does mainly influence sales prices for goods and services? In what currency are the labor, material and other costs denominated and settled? In what currency are funds from financing activities generated (loans, issued equity instruments)? And other factors, too.

Sometimes, sales prices, labor and material costs and other items might be denominated in various currencies and therefore, the functional currency is not obvious.

In this case, management must use its judgment to determine the functional currency that most faithfully represents the economic effects of the underlying transactions, events and conditions.

How to report transactions in Functional Currency.

Initial recognition.

Initially , all foreign currency transactions shall be translated to functional currency by applying the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

The date of transaction is the date when the conditions for the initial recognition of an asset or liability are met in line with IFRS.

Subsequent reporting.

Subsequently, at the end of each reporting period , you should translate:

All monetary items in foreign currency using the closing rate ; All non-monetary items measured in terms of historical cost using the exchange rate at the date of transaction ( historical rate ); All non-monetary items measured at fair value using the exchange rate at the date when the fair value was measured.

How to report foreign exchange differences.

All exchange rate differences shall be recognized in profit or loss , with the following exceptions:

Exchange rate gains or losses on non-monetary items are recognized consistently with the recognition of gains or losses on an item itself. For example, when an item is revalued with the changes recognized in other comprehensive income, then also exchange rate component of that gain or loss is recognized in OCI, too. Exchange rate gain or loss on a monetary item that forms a part of a reporting entity’s net investment in a foreign operation shall be recognized: In the separate entity’s or foreign operation’s financial statements: in profit or loss ; In the consolidated financial statements: initially in other comprehensive income and subsequently, on disposal of net investment in the foreign operation, they shall be reclassified to profit or loss .

Change in functional currency.

When there is a change in a functional currency, then the entity applies the translation procedures related to the new functional currency prospectively from the date of the change.

How to translate financial statements into a Presentation Currency.

When an entity presents its financial in the presentation currency different from its functional currency, then the rules depend on whether the entity operates in a non-hyperinflationary economy or not.

Non-hyperinflationary economy.

When an entity’s functional currency is NOT the currency of a hyperinflationary economy, then an entity should translate:

All assets and liabilities for each statement of financial position presented (including comparatives) using the closing rate at the date of that statement of financial position.

Here, this rule applies for goodwill and fair value adjustments , too. All income and expenses and other comprehensive income items (including comparatives) using the exchange rates at the date of transactions.

Standard IAS 21 permits using some period average rates for the practical reasons, but if the exchange rates fluctuate a lot during the reporting period, then the use of averages is not appropriate.

All resulting exchange differences shall be recognized in other comprehensive income as a separate component of equity.

However, when an entity disposes the foreign operation, then the cumulative amount of exchange differences relating to that foreign operation shall be reclassified from equity to profit or loss when the gain or loss on disposal is recognized.

Hyperinflationary economy.

When an entity’s functional currency IS the currency of a hyperinflationary economy, then the approach slightly changes:

The entity’s current year’s financial statements are restated first, as required by IAS 29 Financial Reporting in Hyperinflationary Economies. Comparative figures are used the same as current year’s figures in the financial statements from previous reporting period. Only then, the same procedures as described above are applied.

IAS 21 prescribes the number of disclosures, too. Please watch the following video with the summary of IAS 21 here:

Have you ever been unsure what foreign exchange rate to use? Please comment below this video and don’t forget to share it with your friends by clicking HERE. Obrigado!

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140 Comentários.

hi silvia, thank you so much for this explanation. i could not understand the difference between functional and presentation currency… now it’s clear, thanks a lot.

Hi Silvia, thank your nice work on this article and video. Those really helpful to understand in determing the currencies used under different circumstances. Keep up your nice work. Muito obrigado.

The following two statements always make me confused.

All resulting exchange differences shall be recognized in other comprehensive income as a separate component of equity.

All exchange rate differences shall be recognized in profit or loss,

Would you please shed light on it.

Hi Ezat, I can understand your confusion, it’s not so easy. Please, as the first thing, realize what you’re translating:

& # 8211; 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.

& # 8211; 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.

Olá. 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. Obrigado.

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. Aprecio seu esforço.

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”. Boa sorte!

Yours is the only resource that that i have found on-line that explains properly what IAS 21 is all about – obrigado. 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 £26m…but then then in comprehensive income it states that Foreign currency translation differences amount to £25m ! therefore almost completely wiping out reported profit.

I cannot work out what could cause foreign currency translation differences to amount to £25m 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.

Espero que ajude! S.

Thank you Silvia yes you are correct of course, the OCI for this year is £25m and the previous year was £20m so £5m difference. Muito obrigado por sua ajuda.

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 don’t pay any advance, then it is the delivery date. But if you incurred real cost (payment) before that day…

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. Obrigado.

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? Conselho por favor.

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? Obrigado.

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” taxa. 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?

boa pergunta. 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.

De qualquer forma & # 8211; you absolutely need to be consistent and use the same principles every time. Espero que isto ajude! 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 ?

Agradecemos antecipadamente 🙂

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. Por favor corrija-me se eu estiver errado.

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. Por exemplo. 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.

Thanks for your support but i have question, what’s the reference in IFRS that bank balance reevaluation should booked as realized gain or loss.

Standard IAS 21 paragraph 28.

I have following queries:

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

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

• As finance cost i. e after gross margin.

• Realized and unrealized Both as finance cost.

• 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.

Eu tenho uma pergunta. 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:

& # 8211; 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.

& # 8211; 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.

& # 8211; Transactions in P/L: you should apply the transaction date rates, so you should be OK.

Espero que isto ajude! 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.

Obrigado! 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:

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

– rights and obligations of transaction established at this date.

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

revenue) (T1): View B.

– first recognition of transaction is when either of parties to contract first.

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

– 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.

– 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”? Muito obrigado.

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 – por exemplo. 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 entity’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.

Agradecemos antecipadamente 🙂

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:

& # 8211; Assets, liability: closing 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?

Desde já, obrigado!!

unfortunately not. PPE is a non-monetary asset and once it sits in your account, you stop thinking of it as about “USD” de ativos. 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? Muito obrigado antecipadamente.

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? Muito obrigado antecipadamente.

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.

Desde já, obrigado.

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 email or give me your email ID?

Esperando sua resposta.

Hi Gaurav, please try resending the message to support@ifrsbox.

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 – customer prepayment 1.000 USD – fx to EUR = 1:1.

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

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

Day 30 – cancellation date, on date of Revenue recognition:

According to IFRIC 22 (effective 01-01-2018) you should take the fx on the actual “transaction date”. 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: – 3.000 / 30 = – EUR 100.

Revenue operator part: – 20.000 / 25 = – 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 €100 now equals £79 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)?

Desde já, obrigado.

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? Desde já, obrigado!

Good learning experience. I’m little unclear. Can you kindly brief once on the steps how to adjust for unrealized profit or loss on intercompany transactions in parent and subsidiary and translation to presentation currency. Also the amount in parent books as per equity and acquisition method. Will both parent and subsidiary company will adjust unrealised gains or losses in thier books before translation. Is any adjustment Is required for realised gains or losses before translation?

can I make revaluation in end of the period with average buy and sale?

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The Project Manager introduced the agenda paper which related to a request for clarification received by the Interpretations Committee. The submitter asked what exchange rate should be used to translate a non-refundable cash payment received in advance for the sale of goods or services. She indicated that IAS 21 stated that a foreign currency transaction shall be recorded, on initial recognition in 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 (paragraph 21 of IAS 21). The date of a transaction was the date on which the transaction first qualifies for recognition in accordance with IFRSs (paragraph 22 of IAS 21). However, IAS 21 did not provide guidance as to how to identify the date of the transaction. She said that the submitter identified three views: a) View A: revenue would be recognised using the exchange rate at the date the contract was entered into or the date the contract become enforceable if later; (b) View B: revenue would be recognised using the exchange rate used to recognise the related deferred revenue on receipt of the cash prepayment and (c) View C: revenue would be recognised using the spot rate at the date of recognition of the revenue (i. e. on transfer of the goods or services). She said that based on their outreach they had identified mixed practice between views B or C. They had also raised the issue to the global preparers’ forum and they found similar concerns. The staff had concluded that IAS 21 was not clear and they believed that view B was more appropriate because it reflected the economics of the situation; when an entity received an advanced payment it would not have further exposure to foreign exchange risks, it would also reflect that the obligation to transfer goods or services was created. The staff concluded that the issue should be added to its agenda to add an interpretation of IAS 21.

Several Committee members expressed agreement with the staff recommendation and agreed that View B reflected the economics of the transaction and acknowledged that there was diversity in practice.

One member said that he agreed with the staff recommendation because the standard was not clear, he also agreed that view B reflected better the economics of the transaction, he said at that point in time, the foreign exchange risks fell within the control of the entity. He said that it would be more challenging to apply view C. He also said that an additional issue could be if in the future there were requirements to disclose open performance obligations, it would not be clear what exchange rate should be applied.

Another Committee member said that they also had to address the presentation of foreign exchange differences.

Another Interpretation Committee member said that the staff should analyse whether a prepayment was variable consideration under IFRS 15. She said that it would also be necessary to analyse how view B would be applied to long term contracts. The Project Manager responded that in their view foreign exchange movements were not variable consideration.

Several Committee members indicated that the issue should be referred to the revenue TRG (Transition Resource Group for Revenue Recognition).

Some Committee members indicated that in the case presented there was only one transaction; while other members understood that there could be two transactions. One member said that an advance prepayment could be made as a hedging strategy to protect against foreign exchange issues, in his view an alternative solution could be between View B and C.

One Committee member said that the issue raised several questions, for example whether deferred revenue was a monetary item. He said that it could be addressed simply but there could be other issues with IFRS 15 which could be more complex.

The Chairman indicated that the issue should be referred to the TRG first because it was an IFRS15 issue. Some members asked whether the TRG would carry out outreach activities, one member said that he understood that the TRG publications were not binding. The Senior Director of Technical Activities agreed that the TRG publications were not binding but still they could identify other problems. He said that it would be important to determine what the transaction was. One IASB Board member said that the TRG would carry out some outreach from its own members.

The Chairman concluded that the staff should proceed, the focus should be on IAS 21, and if they found issues about IFRS 15 then the staff should refer them to the TRG. He also said that the starting point in developing an interpretation should be view B. The Implementation Director also clarified that they would contact the TRG to let them know of the issue.

Tópicos relacionados.

Notícias relacionadas.

New Interpretation on foreign currency transactions and advance consideration.

IASB updates work plan.

IASB updates work plan.

IASB updates work plan.

IASB updates work plan.

We comment on two IFRIC draft Interpretations.

Publicações Relacionadas.

Deloitte comment letter on IFRIC draft Interpretation 2015/2 — Foreign currency transactions and advance consideration.

IFRS in Focus — IFRS Interpretations Committee issues draft interpretation on foreign currency transactions and advance consideration.

Related Standards.

IAS 21 — The Effects of Changes in Foreign Exchange Rates.

Interpretações Relacionadas.

IFRIC 22 — Foreign Currency Transactions and Advance Consideration.

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