Indian Accounting Standard (Ind AS) 21 The Effects of Changes in Foreign Exchange Rate

Indian Accounting Standard (Ind AS) 21 The Effects of Changes in Foreign Exchange Rates Contents Paragraph OBJECTIVE 1-2 SCOPE 3-7 DEFINITIONS 8-16 Elaboration on the definitions 9-16 Functional currency 9-14 Net investment in a foreign operation 15-15A Monetary items 16 SUMMARY OF THE APPROACH REQUIRED BY THIS STANDARD 17-19 REPORTING FOREIGN CURRENCY TRANSACTIONS IN THE FUNCTIONAL CURRENCY 20-37 Initial recognition 20-22 Reporting at the ends of subsequent reporting periods 23-26 Recognition of exchange differences 27-34 Change in functional currency 35-37 USE OF A PRESENTATION CURRENCY OTHER THAN THE FUNCTIONAL CURRENCY 38-49 Translation to the presentation currency 38-43 Translation of a foreign operation 44-47 1 Disposal or partial disposal of a foreign operation 48-49 TAX EFFECTS OF ALL EXCHANGE DIFFERENCES 50

DISCLOSURE 51-57 APPENDICES Appendix A: References to matters contained in other Indian Accounting Standards Appendix B: Illustrative Examples Appendix1: Comparison with IAS 21, The Effects of Changes in Foreign Exchange Rates 2 Indian Accounting Standard (Ind AS) 21 The Effects of Changes in Foreign Exchange Rates (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.) Objective 1 An entity may carry on foreign activities in two ways. It may have transactions in foreign currencies or it may have foreign operations. In addition, an entity may present its financial statements in a foreign currency. The objective of this Standard is to prescribe how to include foreign currency transactions and foreign operations in the financial statements of an entity and how to translate financial statements into a presentation currency. 2 The principal issues are which exchange rate(s) to use and how to report the effects of changes in exchange rates in the financial statements. Scope 3 This Standard shall be applied (a) in accounting for transactions and balances in foreign currencies, except for those derivative transactions and balances that are within the scope of Ind AS 39 Financial Instruments: Recognition and Measurement; (b) in translating the results and financial position of foreign operations that are included in the financial statements of the entity by consolidation, proportionate consolidation or the equity method; and (c) in translating an entity’s results and financial position into a presentation currency. 4 Ind AS 39 applies to many foreign currency derivatives and, accordingly, these are excluded from the scope of this Standard. However, those foreign currency derivatives that are not within the scope of Ind AS 39 (eg some foreign currency derivatives that are embedded in other contracts) are within the scope of this Standard. In addition, this Standard applies when an entity translates amounts 3 relating to derivatives from its functional currency to its presentation currency. 5 This Standard does not apply to hedge accounting for foreign currency items, including the hedging of a net investment in a foreign operation. Ind AS 39 applies to hedge accounting. 5 This Standard applies to the presentation of an entity’s financial statements in a foreign currency and sets out requirements for the resulting financial statements to be described as complying with Indian Accounting Standards. For translations of financial information into a foreign currency that...

Website: www.mca.gov.in | Filesize: 360kb
No of Page(s): 27
Download Indian Accounting Standard (Ind AS) 21 The Effects of Changes in ....pdf