IAS 21 The Effects of Changes in Foreign Exchange Rates
International Accounting Standard 21
Overview of IAS 21
- Issued: in 1983; re-issued in 1993 and 2003, followed by amendments
- Effective date: 1 January 2005
- What it does:
- It prescribes how to include foreign currency transactions and foreign operations in the financial statements.
- It prescribes how to translate financial statements into a presentation currency.
- It defines what foreign exchange rates to use.
- It provides guidance on how to report the effect of changes in exchange rates in the financial statements.
Articles about IAS 21
- Summary of IAS 21 The Effects of Changes in Foreign Exchange Rates
- Monetary or non-monetary? In this article, you'll learn which items in the balance sheet are monetary and non-monetary, with a couple of examples.
- Accounting for advances in foreign currencies - this article explains how various types of foreign currency advances are treated, with numerical examples.
- How to make a change in a functional currency - this article explains when to make a change and contains numerical example of how to do it.
- Example: Consolidation with Foreign Currencies - learn how to consolidate when a parent and a subsidiary use different functional currencies.
- How to Make Consolidated Cash Flow Statement with Foreign Currencies - when you have a parent and a subsidiary with different functional currencies, please do NOT start making consolidated cash flow statement from consolidated balance sheet. Learn here why and how to do it.
Questions and Answers
- Which closing rate to apply? - I explain which currency rate to use for year-end translation when more rates are available.
- How to capitalize exchange rate differences on your loan as a borrowing cost?
- How to determine a functional currency when a company deals with more currencies?
- Foreign currency rates to use when they are not available - What closing exchange rates shall we apply?
- Are contract assets and contract liabilities monetary or non-monetary? - How to account for contracts with customers in foreign currency? - with examples
Other Resources
- IFRS Kit - learn IFRS in 150+ videos, 150+ excel case studies, quizzes, certificates
- Expected Credit Loss for Accountants - highly specialized course focused on ECL under IFRS 9 with step-by-step example related to trade receivables, many practical insights included.
