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Ias 21 Full KPMG
Ias 21 Full KPMG
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 1
Objectives
Understand how foreign currency transactions and balances are translated into a companys functional currency Understand how foreign currency financial statements (FS) are translated for consolidation purposes
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 2
IASBs project on Improvements of IAS New requirements on: the translation method determining the functional and presentation currencies Effective date 1January 2005
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 3
IAS 21 definitions
Foreign currency A currency other than the functional currency of an entity
Functional currency The currency of the primary economic environment in which the entity operates Presentation currency The currency in which the financial statements are presented
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 4
Reflects the underlying transactions, events and conditions that are relevant to the entity
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 5
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 6
An entity cannot avoid restatement in accordance with IAS 29 For example, adopting a stable currency (such as the functional currency of its parent) as its functional currency.
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 7
Recognise transaction at the rate at the transaction date May use approximate rate e.g. average rate for week or month average rates not reliable if currency fluctuates significantly
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 8
Monetary items
Closing rate
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 9
Only if there is a change to the underlying transactions, events and conditions Translation procedures should be applied to the new functional currency prospectively from the date of the change
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 10
Monetary assets
Cash Cash equivalents Marketable debt securities Accounts receivable Notes receivable
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 11
Non-monetary assets
Inventory Prepaid expenses Marketable equity security Investment property Property, plant, and equipment Intangible assets (e.g. goodwill)
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 12
Monetary liabilities
Accounts payable Notes payable Bonds payable Leases payable Accruals Deferred tax
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 13
Non-monetary liabilities
Deferred income Government grant
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 14
To P/L on disposal
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 15
+
Net asset changes from P/L x (EOY historical or average rate) Net asset changes from other equity transactions x (EOY historical or average rate)
+ =
Translation adjustment in equity EOY = Rate at year end (closing rate) BOY = Rate at beginning of year (opening rate)
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 16
Key disclosures
Exchange rate differences included in: P/L (except for financial instruments measured at FV) Equity (with a reconciliation)
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 17
Additional disclosures
Reasons (if applicable): why there has been a change in the functional currency why the presentation and functional currency are different If an entitys presentation currency is different from its functional currency, its financial statements should only be described as compliant with IFRSs if all the requirements of IAS 21 have been applied If an entitys additional financial information is displayed in a currency different from either its functional or its presentation currency and all the requirements of IAS 21 have not been met: clearly identify such information as supplementary disclose the currency of the supplementary information disclose the entitys functional currency and the method of translation used as a basis for presenting the supplementary information
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 21 - 18
Bottom line
An entity does not have a free choice of functional currency Translation of foreign currency assets and liabilities distinguish between monetary and non-monetary Unrealised exchange gains and losses recognised in P/L Comparative Financial Statements
2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
Contact details KPMG IFRG Limited +44 (0)20 7694 8871 www.kpmgifrg.com
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. 2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.