Foreign Exchange transactions at an individual company level under IAS 21

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

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?

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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Defined Benefit Pension Plans | IAS 19 Employee Benefits

Financial statements of defined benefit pension plans In this post we look over the different areas of the financial statements that are affected by a defined benefit pension plan. Statement of Financial Position Both the pension assets and pension liabilities will be recorded in the statement of financial position. Pension assets Pension assets are the …

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FAE Exam Advice

I sat my FAE exams a few years ago, and managed to get through first time around. Here are a few pointers which should be of use to you. What does the FAE exam test? Technical knowledge Practical application of that technical knowledge (NB practical, wasting time showing off your all your theoretical knowledge will …

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How to Recognise Revenue in Multi Component Sales under IAS 18

What is a Multi-component Sale?

So far we’ve looked at revenue from the viewpoint of selling one good or one service at a time.

However, often goods or services can be packaged together for sale in one deal.

Examples of this include the sale of:

  • A washing machine sold with an additional extended warranty
  • A television service sold with telephone and broadband

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EPS: Rights issues, Options and Warrants | IAS 33 Earnings per Share

Definitions of Rights issues, Options and Warrants

A rights issue is where a company offers existing shareholders a chance to buy new shares in the company at below market rates at a future date.

They’re usually offered to shareholders in proportion to their existing shareholdings.

Options and warrants are similar in the sense that people, often employees can get the opportunity to buy shares at below their market rate.

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Introduction to IAS 18 Revenue


Revenue is the name given to an entity’s income that arises in the ordinary course of activities and is known by a number of other names including:

  1. Sales
  2. Fees
  3. Interest
  4. Dividends
  5. Royalties
  6. Rent

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