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IAS 21 The Effects of Changes in Foreign Exchange Rates - Coggle Diagram
IAS 21 The Effects of Changes in Foreign Exchange Rates
1. Foreign Operations
Translation Method
On consolidation
Presentation Currency
Before consolidation
Functional Currency
Definition
Activities based in countries other than those of the reporting entity
Subsidiary, associate, joint arrangement or branch reporting entity
2. Functional Currency
Translation Rules
At year end
Non-monetary
Spot rate at transaction date
Non-monetary measured at FV
Spot rate at FV date
Monetary
Spot rate at year end
Initial recognition
Spot rate at transaction date
Criteria
Currency in which receipts from operating activities are retained
Reporting entity has significant degree of autonomy
Currency in which funds from operating activities are generated
Low proportion of activities with foreign operations
Currency mainly influence labor, material and other costs
Cash flows from the reporting entity is not affected by cash flows from the foreign operation
Competitive forces and regulations in the country mainly determine sales price
Cash flow from its operation is sufficient to service existing and normally expected debt without funds from foreign operations
Currency mainly influence sales price
Exchange Differences
If non-monetary measured at FV, recognise in OCI
Recognise in P/L
Definition
Currency of primary economic environments in which entity operates
3. Presentation Currency
Translation Rules
Income & expense
Average rate
Equity
Spot rate at recognition
Impairment loss
Average/Spot rate at year end
Assets & Liabilities
Spot rate at year end
Exchange Differences
Recognise in OCI (Reclassified to P/L once disposed)
Definition
Currency used to present consolidated financial statements