IAS 21 The Effects of Changes in Foreign Exchange Rates

Foreign Exchange transactions at an individual company level under IAS 21

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When a company enters into transactions in a currency that’s different to its functional currency (i.e. a foreign exchange transaction), the results of these transactions should be translated and recorded in the company’s accounting records in its functional currency. The company can use either: the spot exchange rate on the date the transaction occurred, or Using an …

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Disposal of a foreign subsidiary under IAS 21

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When a subsidiary is disposed of, and the results were translated using the closing rate method, the cumulative exchange difference which has been taken to reserves (because they were unrealised) becomes realised. Under IAS 21, this foreign exchange reserve may be transferred to the income statement on the disposal of the subsidiary as part of the gain …

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What’s a functional and presentation currency under IAS 21?

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When preparing financial statement a company must determine its functional and presentation currencies. The functional currency is the currency of the primary economic environment where the entity operates, in most cases this will be the local currency (e.g. Euro in Ireland, GBP in UK) When determining the functional currency, an entity should consider the following …

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