http://canirmalg.wordpress.com/2010/06/02/ias21foreignexchangerates/

1. IAS 21 The Effects of Changes in Foreign Exchange Rates CA. Nirmal Ghorawat B. Com(Hons), ACA

3. SCOPE

12. FUNCTIONAL CURRENCY ENTITY Primary Economic Environment Sales Operating Costs Capital Borrowed Funds PRIMARY SECONDARY ADDITIONAL INDICATORS (IN CASE OF FOREIGN OPERATION)

15. DEFINITIONS Foreign Currency Currency other than ‘functional currency’. Spot Exchange Rate The ‘exchange rate’ for immediate delivery. Monetary items units of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units of currency

17. SUBSEQUENT MEASUREMENT # Exchange differences arising on monetary items that form part of a reporting entity’s net investment in foreign operation shall be recognized, in consolidated financial statements initially as a separate component of equity and recognized in profit or loss on Disposal of the net investment. Items Translation Rate Recognition of Exchange Differences on Settlement or Translation Monetary Items Closing Rate on Balance Sheet Date To Profit or Loss # Non-Monetary Items at Historical Cost Rate as at Date of Transaction Equity : If Gain or Loss is recognized in Equity. PL : If Gain or Loss is recognized in PL. Non-Monetary Items at Fair Value Rate as at Date of Fair Value Determination

18. EXAMPLE 5 - TRANSLATION Items of BS Monetary or Non-Monetary P&L, Equity or None Rate Loans & Receivable M P & L Closing Rate Available for Sale (AFS) Equity Investment NM at FV Equity (OCI) Rate as at Date of Determination of Fair Value PPE (Fixed Assets) NM at Cost Equity Rate as at Date of Purchase Investment Property at FV NM at FV P & L Rate as at Date of Determination of Fair Value Prepaid Expenses NM NA Rate as at Date of Transaction Deferred Revenue NM NA Rate as at Date of Transaction

19. TRANSLATION TO PRESENTATION CURRENCY * * Except that of an entity whose functional currency is the currency of a hyperinflationary economy. # Average Rate is permitted, if the exchange rates don’t fluctuate significantly. Items Translation Rate Recognition of Exchange Difference Assets and Liabilities (including Comparatives) Closing Rate on Balance Sheet Date As a Separate Component of Equity. Income and Expenses (including Comparatives) Exchange Rate at the date of the transaction # Equity (including Comparatives) Historic Rate or Closing Rate (Management Policy)

20. SUMMARY