Understanding Foreign Exchange

various world currency notesA foreign currency transaction should be recorded initially at the rate of exchange at the date of the transaction (use of averages is permitted if they are a reasonable approximation of actual).

At each subsequent balance sheet date, foreign currency monetary amounts should be reported using the closing rate non-monetary items, carried at historical cost should be reported using the exchange rate at the date of the transaction. Non-monetary items carried at fair value should be reported at the rate that existed when the fair values were determined.

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  • The value of exchange differences recognised in profit or loss (excluding differences arising on financial instruments measured at fair value through profit or loss in accordance with IAS 39)
  • Net exchange differences recognised in other comprehensive income and accumulated in a separate component of equity and a reconciliation of the value of such exchange differences at the beginning and end of the period.
  • When the presentation currency is different from the functional currency, disclose that fact together with the functional currency and the reason for using a different presentation currency.
  • A change in the functional currency of either the reporting entity or a significant foreign operation and the reason therefor.

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