Flashcards IAS 21

Question 1

IAS 21 : Objective

Answer 1

1) How to include FC transactions + operations in FS (functional currency)
2) How to translate FS into presentation currency

Question 2

IAS 21 : definition of functional currency

Answer 2

Currency in the primary economic environment in which the entity operates. Criteria

Currency/country whose competitive forces/reculations determine

a- sales prices

b- services prices

c- labor cost

d- transactions

secondary factors :

longterm financing

excess working capital

subsidiary :

autonomy

relative interco trans volume

cash assistance from parent

Question 3

IAS 21 : How are transactions translated to functional curry ?

Answer 3

Initial recognition : spot rate

Subsequent :

• monetary (eg. Cash/AR)
• > closing rate
• non-monetary (eg. PPE, int assets)
  (i) measured hist cost
• > historical rates
  (ii) measure FV
• > rate when measured

Question 4

IAS 21 : How are variances due to FC rate changes recorded ?

Answer 4

1) in PL, except for
2) Non-monetary w/FC revaluation to OCI
- > OCI for the related component in OCI
3) Net investment in foreing ops :
- > PL individual FS
- > OCI in consolidated FS

(reclassified to PL upon disposal)

Question 5

IAS 21 : How are FS translated ?

Answer 5

1) Assets/Liabs -> closing rate
2) income/expneses/OCI->historical (average)
3) equity -> not specified/hist rates
4) differnce in equity/OCI-CTD
5) hyperinflation econcomy :

first restate according to IAS 29

Question 6

IAS 21 : What is the definition of monetary + non-monetary assets/liabs ?

Answer 6

Monetary : there is a right to receive/obligation to pay in fixed/determinable amount of currency units (cash)