Monetary or Non-Monetary - CPDbox - Making IFRS Easy

2/24/2021 Monetary or Non-Monetary?
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After 2 months, I landed a new position of IFRS conversion manager with 70% pay rise.
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Monetary or Non-Monetary?
by Silvia
 FINANCIAL INSTRUMENTS, FOREIGN CURRENCY, IFRS ACCOUNTING, INCOME TAX, MOST POPULAR
 274
When you need to translate your items denominated in foreign currency to your own
functional currency, then there’s one little problem:
Is that item monetary or non-monetary? 
https://www.cpdbox.com/monetary-non-monetary/ 1/97
2/24/2021 Monetary or Non-Monetary? - CPDbox - Making IFRS Easy
If you
After determine
2 months, the nature
I landed a newofposition
your item
of incorrectly, it can manager
IFRS conversion lead to totally
withwrong
70% pay rise.
presentation in the nancial statements.
It’s not so important when you consolidate and you need to translate some foreign
subsidiary to your own presentation currency, right?
Why?
Because, the rules in IAS 21 The E ects of Changes in Foreign Exchange Rates say that
in such a case, you translate all your assets and liabilities by the closing rate. That’s clear.
But when it comes to translating individual items and transactions in your own nancial
statements to the functional currency, then the rules are more complex.
Let’s take a look.
What do the rules say?

For translation of the amounts in foreign currency to your functional currency, the
standard IAS 21 states that you should re-calculate all items after initial recognition using
exchange rate based on characteristics of the speci c item.
More speci cally:
For all monetary items in foreign currency – use closing exchange rate at the
reporting date;
For all non-monetary items in foreign currency carried at historical cost – use the
historical exchange rate (at the date of transaction – thus, you keep non-monetary
asset at historical rate with no recalculation);
For all non-monetary items in foreign currency carried at fair value – use the
exchange rate at the date when fair value was determined.
The principal question here is:
What is monetary and what is non-monetary?

There’s one essential characteristic that makes a di erence: 
A right
After to receive
2 months, or obligation
I landed to deliver
a new position a xed
of IFRS or determinable
conversion managernumber of units
with 70% pay of
rise.
currency.
All monetary items DO have this feature. All non-monetary items DO NOT have this
feature.
Once you apply this rule of thumb, it should be easy to determine what’s monetary and
what’s not.
In the following table, I have summarized various kinds of items with their characteristics
for you:
Item Monetary/Non-monetary
Assets
Property, plant and equipment Non-monetary
Intangible assets (including goodwill) Non-monetary


Investments in associates Non-monetary
Non-monetary – see
Equity investments (e.g. shares)
below
Investments in debt securities Monetary
Net investment in the lease Monetary
Biological assets Non-monetary
Deferred tax asset Monetary – see below
Inventories (including allowances) Non-monetary
Trade receivables (including allowances) Monetary
Other receivables to be settled in cash Monetary
Advances and prepayments It depends – see below
Deposits and bank accounts Monetary
Cash Monetary
Equity and liabilities
Non-monetary – see
Share capital
below
Other components of equity Non-monetary
Provisions for employee bene ts Monetary
Finance lease liability Monetary
Deferred tax liability Monetary – see below
Bank and other loans Monetary
Accruals Monetary
Deferred income Non-monetary
Trade payables Monetary
Advances received It depends – see below
Current tax liability Monetary
As you can see from this table, some items are crystal clear, but some of them are not
and further questions arise.
Advances paid or received

You need to assess the character and substance of every advance paid or received
carefully, because some advances can be monetary and some of them can be non-
monetary.
However, I have explained particularly this issue in my article on Accounting for

prepayments in foreign currency under IFRS together with the numerical example, so
please read there if interested.

Deferred
After 2 months,taxation
I landed a new position of IFRS conversion manager with 70% pay rise.
Clickinhere
Currently, this is a little bit unclear to learn more
the standards.
The standard IAS 12 Income Taxes indirectly indicates that the deferred tax assets and
liabilities are monetary items, because it notes that the exchange rate di erences on
deferred foreign tax liabilities or assets are recognized in the statement of
comprehensive income (par. 78).
Investments in preference shares

Investments in preference shares are another item that requires our careful judgment.
More speci cally, you should assess the rights attaching to the shares.
In fact, both IAS 39 and IFRS 9 say that investments in equity instruments are non-
monetary items.
It means that if terms of the preference shares lead to the shares classi ed as equity
instrument, then they are non-monetary.
For example, the share that does NOT specify any mandatory redemption by the issuer
at some future date would represent an equity instrument (or at least an equity
component of a compound nancial instrument).
On the other hand, if terms of the preference shares lead to the shares being classi ed
as a nancial liability, then it should be treated as a monetary item.
For example, the share that DOES specify mandatory redemption by the issuer at some
future date would represent a liability.
Share capital in a foreign currency

Some companies issue their share capital in a foreign currency.
However, neither IAS 21, nor IFRS 9/IAS 39 specify whether the share capital in a foreign
currency is monetary or non-monetary item and how to treat the di erence.

In practice,
After 2 months, theI landed
ordinarya share capital isofviewed
new position as non-monetary
IFRS conversion manageritem and70%
with maintained
pay rise. at
the historical rates. The reason is that its retranslation to closing rate does not a ect the
cash ows of the company.
However, I have experienced the opposite in the past. A few companies treated their
foreign currency share capital as a monetary item, but they took foreign exchange
di erences directly to equity, and not to pro t or loss. In this case, total equity is the
same as the share capital would have been kept at the historical cost.
Is there any item you would like me to explain further? Please leave me comment right
below article. Do not forget to share this article with your friends. Thank you!
Please, let me know in a comment below the article and if you know someone who can
use this information, please share – thank you!
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IAS 12 IAS 21 IAS 39 IFRS 9
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59 / 173
274 Comments
Liz June 18, 2015 at 8:33 pm

Hi Silvia! Thanks for all the information that you share with us.
I have a question, in the company that i work, for IFRS purposes, we had to
di er revenues for services in a Venezuela´s subsidary.
So, we have a Deferred Revenue in our nancial statements.
My question is, when we made the calculate, the amount was converted at
average rates… that was for 2013 when the exchange rate was 6.3, but in
2014, they had a devaluation, and the close exchange rate was 49.99 and
the average rate was 30.61…
Should we reduce the “deferred income” ? and what exhange rate we have
tu use,
because really I can not identify whether it is a monetary or non-monetary
item.
Really I appreciate a reply.
Best regards,
Liz.
P.D: I´m sorry for my english language. Im from Colombia.
 Reply
Silvia M. June 19, 2015 at 9:50 am

Hi Liz,
well, I should have clari ed that an article deals with non-
hyperin ationary economy. Your case seems like Venezuela 
was hyper
After 2 months, I landed a new in of
position ationary (from the crazy
IFRS conversion movement
manager in foreign
with 70% pay rise.
exchange). In fact, you should restate your comparative gures
in line with IAS 29 and IAS 21 paragraph 43. S.
 Reply
Liz August 13, 2015 at 5:32 pm

Thank you!!!
 Reply
Roger February 14, 2017 at 12:02 pm

Hi Silvia,
Deferred revenue under hyperin ationary
economy…
In the company am working with, the reporting
currency is di erent from USD, however, the
majority of transactions are being conducted in
USD. A big part of our deferred revenue is in USD
currency.
Since deferred revenue is non-monetary item, for
B/S, this can be restate your comparative gures in
line with IAS 29 and IAS 21 paragraph 43. S. at
balance sheet date. What is treatment for the
amount being released into P&L? What rate to use,
prevailing rate when the invoice was issued or
prevailing rate when the revenue is recognized?
Thank you for clarifying this.
 Reply
joe March 4, 2019 at 7:23 pm

Liz, any thoughts on how to go about accounting for on Day 1
and Day under IFRS for exchange of a note receivable for 
services rendered for preferred shares with a redemption
schedule?
 Reply
Rich B June 19, 2015 at 12:45 am

Hi Silvia – your stu is really brilliant. They should make a James Bond
movie with you in it as a forensic accountant tracking down the ‘baddies’.
 Reply

LOL
 Reply
Rajkumar Khadka June 19, 2015 at 5:27 am

its extremely helpful for me
Thank you so much !!!!
 Reply
Oneua June 19, 2015 at 7:35 am

It is indeed the best website and useful information.
Thanks
Oneua
 Reply
Evase NIYIGENA June 19, 2015 at 8:46 am

Hello Silvia,
Thank you for your training on IFRS its really helpful.

I have a question;
After 2 months,my presentation

I landed a new currency
position ofis USD
IFRS and my functional
conversion managercurrency is Rwf(
with 70% pay rise.
Rwandan Francs), i received a loan of USD 1,000, the exchange rate was Rwf
700/USD then at the end of the year i had an exchange loss of Rwf 500 in
my P/L but i want to translate the nancial statements into presentation
currency,
my question is, will i translate even the exchange loss using the average
exchange rate or i will ignore it.
Thank you.
 Reply

Is your exchange loss of Rwf 500 already realised? Yes, you
should translate it, too.
 Reply
jasper english June 23, 2018 at 11:18 am

yes silvia
u nid to translate even the exchange loss
 Reply
cynthia June 19, 2015 at 9:40 am

For the rst time in my life i feel like i can conquer any Accounting problem.
Thanks Silvia
 Reply
Rajesh Thakur June 19, 2015 at 10:13 am

Hi,
Kindly explain in case of Monetary items the exhange rate di erence is
taken to Pro t or Loss account or to comprehensive income?

After 2 months,Thanks
Rajesh
 Reply
Silvia June 20, 2015 at 6:33 pm

In pro t or loss when you translate to your functional currency.
 Reply
AbdurRehman June 19, 2015 at 2:04 pm

It’s encouraging to see how simple you make IFRSs for the masses. The
profession needs more people like you! Keep it up.
 Reply
Amel June 20, 2015 at 10:13 am

Thank you very much Silvia for clari cation ,really the topic is confused for
us.
but some time your answer is very brief eg Evase question.
 Reply
Silvia M. June 20, 2015 at 6:31 pm

Hi Amel,
sometimes the questions are not very clear to me and I need
additional explanation – e.g. Evase questions.
 Reply
Reshma June 21, 2015 at 10:02 pm

Hi
Great job and here’s my question. 
After 2 months,If Ian invoice

landed is billed
a new in oneofcurrency
position and paid manager
IFRS conversion in a di erent
withcurrency
70% payatrise.
a
later date
What rate should the invoice and Payment be recognized at?
 Reply

Hi Reshma,
initially, you recognise the invoice with the rate valid at the date
of transaction (which is the date when the liability was created –
or the supply date and it should be stated on the invoice) and
the payment at the rate valid at the payment date. The
di erence is recognised in P/L. S.
 Reply
Viru February 9, 2020 at 3:08 pm

Investment (in subsidiary) held for sale would be
classi ed as current or non current
 Reply
Rohan Kodagoda June 25, 2015 at 4:37 am

Thank you very much Silvia for clari cation
 Reply
Rosita June 27, 2015 at 3:53 am

Accounting for nancial instrument
 Reply
Renato Valia June 29, 2015 at 5:36 pm 
After 2 months,HiI landed

Silvia. a new position of IFRS conversion manager with 70% pay rise.
I hope this message nd you well. I am from Brazil and I work in a company
that reports the statements in accordance to the IFRs purposes. My
question is related to the monetary and non monetary principles.
Considering that my local currency is reais and Brazil is not longer a hyper
In ationary economy. Based on that, 99% of the inventories have been
translated as non monetary item. However, we have some inventories that
are being managed only locally (no exportations) which the currency are
managed only in Reais (i.e. Ethanol and Sugar). So, I am wondering if in this
case, I have the possibility to keep it as monetary item considering these
inventories as exception. Is it allowed by the IFRS/ IAS ? Is there any memo
or documentation from the IAS ?
 Reply

Hi Renato,
I understand your concerns, but unfortunately no, inventories
are non-monetary item as there’s no right to receive cash in the
future. S.
 Reply
Renato Valia June 30, 2015 at 8:10 pm

crystal clear Silvia. Thank you very much.
 Reply
Ify July 24, 2015 at 8:20 am

Hi Sylvia. Thanks a lot.
My company records transactions in USD but wants to report in another
currency. Hence, the nancial statements will be translated from USD
currency to the other currency

After 2 months,If II landed

understand you
a new correctly,
position Property
of IFRS plant and
conversion equipment
manager withshould berise.
70% pay
translated at the rate on the day the items were bought.
Please I’m not so clear on the rate for Accumulated depreciation.
Depreciation does not occur in a day, it occurs throughout the year hence,
average rate is used to translate it from USD to the other currency in income
statement. So, what rate should I use for Accumulated depreciation?
Thanks for your response
 Reply
Silvia M. July 24, 2015 at 8:39 am

Hi Ify,
yes, not everything is perfect
For translating to functional currency: Accumulated
depreciation is translated with the same rate as the cost,
because once you translate your PPE to the functional currency,
then it’s no more asset in the foreign currency.
However, you are asking about the translating to the
presentation currency and that’s the di erent thing. In this case,
you do NOT translate PPE at the historical rate, but at the
CLOSING rate at the balance-sheet date. The same with
accumulated depreciation.
Hope it helps
S.
 Reply
Ify July 27, 2015 at 9:24 pm

Yes it does help. Thank you.
 Reply
Ify August 4, 2015 at 7:56 pm 

Sylvia. a new position of IFRS conversion manager with 70% pay rise.
Please, my companyClickpaid
herein advance
to learn for
moresome items. These items had not
been delivered to my company as at year end.
In translating my nancial statements to a presentation currency for
reporting purposes, should I use the rate at the day the payment was made
since there has not been any movement in the amount as at year end or do I
use closing rate?
Thanks for your response.
 Reply
Silvia M. August 5, 2015 at 12:01 pm

Hi Ify,
this is the question related to advances paid. Please refer to this
article and you’ll nd your answer:
http://www.cpdbox.com/accounting-for-prepayments-in-
foreign-currency-ifrs/
S.
 Reply
zukky August 11, 2015 at 3:31 pm

Dear Silva,
my question goes thus:
Is loan a monetary or non-monetary item & what e ect did loan has on the
nancial statement when running the exchange di erence?
 Reply

Loan is a typical monetary item. And I’m not quite sure what
you’re asking in the second part of your question – if the loan is
in the foreign currency and you need to translate it to your 
presentation
After 2 months, I landed a new positioncurrency, you need to
of IFRS conversion use year-end
manager ratepay
with 70% andrise.
any
di erence is recognized in P/L.
 Reply
Manish September 2, 2015 at 12:48 pm

Hi Silvia,
This question is related to conversion as well as consolidation.
Please con rm If my understanding is correct for the loan given by holding
company to its subsidiaries.
Short term (current) loan given by Holding to subsidiary, if any exchange
di erence (due to di erence exchange rate in the respective region) , it
should go to P&L considering Monetary items
Quasi loan (Long term)- given by Holding to subsidiary,
if any exchange di erence (due to di erence exchange rate in the
respective region), it should go to Foreign currency translation reserve
(under equity) considering that it is Non-Monetary items.
Kindly con rm!
Thanks in advance.
Manish
 Reply
isam September 3, 2015 at 9:27 pm

Hi Silvia,
Am an ACCA Member from Sudan and i beleive your articles is very
interesting and quite simple.
Thanks alot for your help.
Isam Warsama
 Reply 
Anil Lohidakshan September 8, 2015 at 8:26 pm
Hi Silvia
I am pretty happy to see this website. It is very useful as things are explained
with ease
I wanted to know something more on the translation of foreign exchange
balances:
For example: If the functional and presentation currency is USD and there is
a bank account in say GBP (Great Britain Pounds). If the transactions are
carried out and balances are held in the GBP denominated bank account
only for transactions carried on by a client and not for the Company’s use
should the company still revalue this bank account to USD at the reporting
date exchange rate (i.e. like a monetary item) or it can tally the bank recon in
GBP and USD balances to be reported would the original GBP transactions
converted to USD at the rate on the date of transaction?
It shall be of great help if you can guide me on this
Many thanks
Anil Lohidakshan
 Reply
Kashif Siddiqee, FCA, CICA September 21, 2015 at 12:32 pm

This a very good site to understand the things in simple manner without
making things ambiguous and making others confused.
 Reply
Sarah September 23, 2015 at 5:26 am

Hi Silva,
After 2 months,Really helpful

I landed a newarticle and website
position but was justmanager
of IFRS conversion hoping forwith
a little
70%more
pay rise.
guidance. I work in Myanmar where the functional currency is kyat and
reporting currency is USD. Our parent company is based in Singapore with
reporting currency USD. They invested $25,000 share capital into each
entity. This of course got translated at historical rate into kyat and is now
valued as approx $23,500. For the purposes of intercompany reconciliations
surely the $25,000 invested would need to be held as $25,000 now to
match between the companies? You mention being able to revalue this to
the OCI, rather than P&L, which then presumably would mean that share
capital would become $25,000 and the the FX would be recognised
through equity at -$1,500. On my accounting software, Xero, I cannot see an
OCI – can I create an account and post directly to the balance sheet?
Please let me know if I have the right understanding! Thanks,
Sarah
 Reply
Svetlana Hristova October 15, 2015 at 1:24 pm

Dear Silvia,
The article is indeed very interesting and helpful. I have one question: what
are the advances paid to sta e.g. salary advances or advances for work-
related travel – monetary or non-monetary items?
Thank you in advance!
Kind regards,
Svetlana
 Reply
Silvia M. October 16, 2015 at 2:47 pm

Hi Svetlana,
are you paying the salaries in a foreign currency? hmmm,
interesting. 
Anyway
After 2 months, I landed a new – is there
position a right
of IFRS to get the
conversion cash back
manager in 70%
with the future?
pay rise.
From the practical point of view, I would treat work related
advances as monetary items (because your employees will
need to make a settlement and pay you something back). I
would treat the salaries in the same way, although you can
argue that these advances are already earned by the employee.
It depends on when you pay them, too. S.
 Reply
Ajith October 21, 2015 at 6:33 am

Hi Silvia
Thank you for your material and Could you make clear me further about
Share capital in a foreign currency.
It is not clear me about your comment “they took foreign exchange
di erences to the statement of other comprehensive income, and not to
pro t or loss. In this case, total equity is the same as the share capital would
have been kept at the historical cost”
Thank you
 Reply
Amit Kemani October 30, 2015 at 2:14 pm

Hi Silvia,
An entity is having a tax exemption for next 10 years. Whether its a monetary
item or not. Whether it van be recorded as intangible assets
A license which is transferable, hold by company is a monetary item or not.
Whether it can also be recorded as intangible assets in the company
balance sheet.
 Reply

After 2 months,JeI landed a new25,position

November 2015 at of IFRS
2:40 pmconversion manager with 70% pay rise.
Hi Silvia – Click here to learn more
Our company paid expenses on behalf of a client to gain their business for 5
years. The client agreed to pay us the cash value of the unamortized portion
of the expenses we covered if they terminate the contract early.
Would you consider this monetary or non-monetary?
p.s. your site and materials are a great resource! Thank you!
 Reply
Silvia M. November 29, 2015 at 8:40 pm

Hi Je ,
is there a right to receive the cash? I guess not – only if the
possibility of terminating the contract early is probable. If it’s not
probable, then it’s non-monetary. S.
 Reply
Je November 30, 2015 at 2:45 pm

Correct, we do not have the right to receive cash
unless a contract termination takes place. So,
classi cation of non-monetary makes sense.
Thanks!
 Reply
Leonard December 10, 2015 at 12:17 pm

Hi Silvia,
Thanks for your article.
It’s make me more clear when doing the translation process for changes in
functional currency (eg: USD to GBP).

After 2 months,Nonetheless, there

I landed a new is one of
position question came across
IFRS conversion my mind
manager that70%
with what
payif rise.
the
company function currency (eg: GBP) change back to USD in future (eg: 3
years later).
Then how is the accounting treatment of the ‘translation di erences’
recognised in other comprehensive income arises from year 1 to year 3. In
the other word, there will resulted a ‘translation reverse’ to be show in the
statement of changes in equity for those translation di erences.
My thinking is to realised all the translation reserve to retained earning at
the nancial year when the functional currency change back to USD(eg: in
year 4).
But, I not sure it is practicable or any Accounting Standard to refer.
Thanks.
P/S: Assuming the nancial statements are all the way present in USD.
Best Regards,
Leonard Lim
 Reply
Fae December 14, 2015 at 12:49 pm

Here is a challenging one for me. Is Work in progress derive from rendering
of services monetary or non-monetary?
Also Work in progress (WIP) is a current asset. In relation to impairment of
WIP which IFRS should I use to address this?
 Reply
Silvia M. December 16, 2015 at 7:55 pm

Fae, the same question again: is there a right to collect cash or
some other nancial asset in the end? I guess that no in the
case of WIP, so I would say it’s non-monetary. S.
 Reply 
Hein Harmse January 11, 2016 at 2:06 pm
Hi Sylvia,
I.t.o. the latest IFRS, is there any scenario where exchange losses may be
capitalised to an asset? Some years ago SIC11 made provision for this (if
certain criteria were met) but it was subsequently superseded by IAS21.
Please let me have your thoughts.
Thanks
Hein
 Reply
Elvis February 11, 2016 at 11:26 am

Hi Silvia,
Is deferred expense monetary or non-monetary?
 Reply
Silvia M. February 11, 2016 at 1:20 pm

Non-monetary.
 Reply
TH March 9, 2016 at 4:29 am

Hi silvia
what kind of transaction is exchanging A/R with land?
for example customer owes 100000 but instead of cash they are giving
150,000 land.
 Reply
Silvia M. March 10, 2016 at 8:18 pm 
Dearposition
After 2 months, I landed a new TH, of IFRS conversion manager with 70% pay rise.
receivable is still monetary asset and a land is non-monetary. S.
 Reply
dncplcn March 13, 2016 at 3:20 pm

Hi, is the obligations under nance lease and pension bene ts to be paid is
monetary? And why?
 Reply
Anil NK March 14, 2016 at 1:25 pm

Hi Silvia,
This article you have posted is very informative.
I myself am studying US GAAP.
Under US GAAP, for consolidation of foreign subsidiaries, I have understood
that rst I need to re-measure the nancials of local currency to functional
currency using Temporal method. To apply the method one should clearly
identify monetary and non items in FS.
Please let me know whether I can reasonably assume that the classi cation
details you have mentioned in this post hold good under US GAAP too?
 Reply
Silvia M. March 16, 2016 at 9:08 am

Hi Anil,
in general yes, I think so – the above table would do well also
under US GAAP. S.
 Reply

Diego Roma March 23, 2016 at 9:56 pm

Silvia. One question.
a new I´moffrom
position IFRSArgentina.
conversionI work in a company
manager which
with 70% pay rise.
functional currency is USD. Income tax are calculated and paid in local
currency (ARS). Quarterly we calculate deferred tax income taxto report our
gures to headquarters, obviously in USD. However, the deferred tax
asset/liability, must be consider as a balance in ARS or USD?
Thanks
Regards
Diego
 Reply

Diego, I’m not sure I understand your question. If you pay taxes
in ARS, then your deferred tax is ARS asset/liability because it
will be cleared in ARS in the future. Is that what you asked? S.
 Reply
Diego Roma March 29, 2016 at 1:56 pm

Yes, you answered my question. Thanks!
 Reply
Leonora N. Tagun April 9, 2016 at 2:36 pm

Dear Ms. Sylvia,
As per IAS 16.24 – Exchange of Non-Monetary Fixed Asset
Is it right or in line with the IAS to record Gain on Exchange of xed Asset
immediately? (its similar in nature)
Thanks and regards,
Lenlen
 Reply
After 2 months,Askar Aprila 19,

I landed new 2016 at 3:30ofpm
position IFRS conversion manager with 70% pay rise.
Hi Sylvia,
Great stu on the website, thanks.
Is intercompany payables (when a branch owes its parent company)
monetary or non-monetary item?
The parent company (a) funds the branch or (b) pays the 3rd party invoices
and recharges back to the branch.
Thanks in advance!
 Reply
Alfy May 3, 2016 at 7:14 pm

Hello Sylvia,
Thanks for sharing such great insight.
A quick question.
My functional currency is dollar.
Assuming I acquire a loan of £10,000 at a spot rate of $1.2/£ in
March and used the loan to acquire (Plant) PPE costing £10,000.
Giving that $/£ is 1.5 in December
When preparing the nancials in USD at year end, do I state the
PPE at $12,000, Loan at $15,000 and Loss of $3,000
OR restate the PPE at $15,000 with a corresponding gain of
$3,000?
 Reply
Silvia M. May 3, 2016 at 7:58 pm

Hi Alfy,
you do not restate PPE – it’s a non-monetary item.
The rst option is correct. S.
 Reply
Alfy May 5, 2016 at 2:24 pm


Thank you
After 2 months, I landed a new position of IFRS conversion Sylvia. with 70% pay rise.
manager
Am grateful.
 Reply
wartol May 8, 2016 at 12:50 pm

I enjoy your way of writing really enjoy this website.
 Reply
Tanya May 16, 2016 at 5:06 am

Omg, this is so helpful! I’m preparing FS for a company for the last 8 years
with share capital contibutions in di erent currencies spread over the years
:-O
 Reply
Paul May 19, 2016 at 8:49 pm

Hi Silvia,
What a great article! so I work for a publishing company where our
magazines are sold on a sale and return basis. On day one we accrue for
what we expect the nal sale to be and our distributor will the pay us say
70% percentage of the anticipated nal sale at the exchange rate on the day.
6 months later they pay say, 20% of the nal anticipated sale at the
exchange rate on the day and when the magazine comes o the shelves
they will true up the nal 10% at the exchange rate on the day. I assume that
this is a monetary item but how would you treat the fx gains and losses?
 Reply
Nirav May 28, 2016 at 7:04 pm


Hi Silvia,
After 2 months,I must say ayou

I landed newareposition
doing great job.conversion
of IFRS Thank you manager
very muchwith
for educating all
70% pay rise.
accounting community in such a simple manner. My question is IFRS is
silent about using BUY rate OR SELL rate while recording transaction. Also,
for example, evaluating any monetary assets at the closing date, also, which
rate should be used. BUY, SELL OR AVERAGE. It may make big di erence
between average and BUY/SELL rate when Amounts are really big.
Thanks.
 Reply
Silvia M. May 30, 2016 at 10:49 am

Dear Nirav,
IAS 21 in paragraph 26 states that when you have several rates
available, then you should take the rate at which you would
settle the liability or recover the asset at the measurement date.
Practically it means – if you have USD receivable, then you use
buying rate (you will receive USD and bank buys them to
convert to INR), and if you have USD liability, then you use sell
rate.
Anyway – you absolutely need to be consistent and use the
same principles every time. Hope this helps! S.
 Reply
Shuchita June 7, 2016 at 3:39 pm

Nicely explained
 Reply
Lawrence June 8, 2016 at 10:12 am

Hi Silvia,
Since Share Capital denominated in foreign currency is using historical rate.
When we have a Capital reduction, do we use the historical rate or the 
After 2 months,transaction
I landed a spot
new rate?
position of IFRS conversion manager with 70% pay rise.
In my opinion, I think it should be using historical rate.
Just wondering whether you think otherwise?
 Reply
Eric June 13, 2016 at 3:39 pm

I think the exchange di erence should go into OCI in company
level and conso level as it is capital in nature. Right?
 Reply

Interesting question. It’s not solved in the IFRS at all. I would
apply historical rate and show any foreign exchange in pro t or
loss. Let me draft the journal entries:
– Liability to shareholders from capital reduction: Debit Share
capital / Credit Liability – using historical rate
– Cash paid to shareholders: Debit Liability , Debit P/L – FX loss
/ Credit Cash (using actual spot rate).
If the pay out is after the end of the reporting period, then you
would revalue the liability by the actual closing rate via P/L. S.
 Reply
Sara June 16, 2016 at 10:27 am

Hi Silvia,
Thanks for this post.
I have a question. Could you please tell me the deferred tax impacts on
FCTR (Foreign Currency Translation Reserve) / CTR (Cumulative Translation
Reserve)?
Thank you
Sara

 Reply
Dear Sara,
please can you clarify the question? Are you asking on how to
treat the deferred tax when it translates to the presentation
currency? Or whether to recognize deferred tax on CTR? Or…? S.
 Reply
Andy June 28, 2016 at 4:36 am

Hoping you can help clarify treatment of AROs / Restoration obligations
likely to be settled in a currency other than a company’s functional currency.
Would these be treated as monetary liabilities and retranslated at each
reporting date or non monetary?
 Reply
Silvia M. July 6, 2016 at 8:40 pm

Dear Andy, yes, you are right. The reason is that ARO is a typical
obligation that will be settled by spending some cash. If it’s in a
foreign currency, you need to revalue it at the end of each
reporting period. S.
 Reply
Su June 28, 2016 at 12:16 pm

Hi Silvia,
I have one question. I worked in one big bank’s nance. In end of month,
their system auto-revalued all foreign currency expenses using month end
closing rate. So expenses increased. Is it correct? I don’t think it follows to
IFRS.
Thanks for your time.

 Reply
Dear Su, you are right, this is not in line with IFRS. IFRS asks to
translate foreign currency transactions by their actual spot rate.
S.
 Reply
Su July 14, 2016 at 4:34 am

Thank you..
 Reply
Su July 14, 2016 at 5:11 am

Dear Silvia,
Su again. I would like you to explain more about Share capital in a foreign
currency. As I am working in foreign bank of Myanmar, presentation
currency is in USD, I would like to understand how the exchange di erence
due to capital funds is presented. We are preparing trial balance, balance
sheet daily and capital is in USD which is xed in historical rate. Currently we
took the exchange di erence of balance sheet item as a revaluation reserve,
not to pro t and loss. The exchange rate is in downward trends nowadays. If
we take it as a pro t, we will make a huge net pro t in our accounts. I would
like to hear your opinion.
I am looking forward your kind reply. Thank you.
 Reply
Su July 14, 2016 at 5:12 am

Sorry. Presentation currency in Myanmar is MMK (Myanmar
Kyat).
 Reply
After 2 months,Nidhi Julya28,

I landed new2016 at 3:31 of
position pmIFRS conversion manager with 70% pay rise.
Hi Silvia,
How are you,
I am Nidhi from India. I saw your videos on you tube and it was very
impressive. I want to learn more and interested in your IFRS kit.
Professionally I am chartered accountant and work in MNC,I have few
question
1 Whether your IFRS KIT only helpful for students or help professionals?
2 you were asking practical examples in your tutorial video whether the
example was those which we read in books during student life or practical
example which we face daily.
Thanks and Regards
Nidhi
 Reply

Hi Nidhi,
thanks for commenting, however, this is o the topic. Let me
reply shortly:
1. I would say for both as both students and professionals are
within my students.
2. Also, I would say both. The material in the IFRS Kit starts from
the basics and therefore, there are some basic “student”
examples, but then goes to more di cult topics and also
examples are more from real life and involving complexities.
Please, if you have more questions, contact me via my contact
page and I’ll get back. Thank you!
 Reply
Rose August 3, 2016 at 5:14 pm 
After 2 months,If II landed

credit sales/
a newrevenue
positionand debitconversion
of IFRS trade receivables.
manager Is with
sales70%
a monetary
pay rise.
item for foreign exchange rate purposes
 Reply
Suraj Shrestha August 15, 2016 at 9:28 pm

If i receive foreign currency as advance for goods. I have recorded on spot
exchange rate. However at the time of recognition of such advance as
income should i calculate the exchange gain or loss.
 Reply
Silvia M. August 16, 2016 at 6:56 am

Dear Suraj,
I think this article about foreign currency advances will help
you. It speaks about property, plant and equipment, but is
applicable also to inventories. S.
 Reply
Suraj Shrestha August 16, 2016 at 3:30 pm

Thank you so much!!
 Reply
Santosh Reddy August 18, 2016 at 7:16 am

Hi,
Can you give some Examples of long term foreign currency monetary items.
 Reply
Silvia M. August 18, 2016 at 8:40 am
Hi Santosh,
After 2 months, I landed a new e.g.
position oflong-term foreignmanager
IFRS conversion currency with
loan 70%
or a bond
pay rise.
denominated in foreign currency would be long-term monetary
items.
 Reply
Colleen Orio September 21, 2016 at 7:56 am

Hi Ms. Silvia,
Currently doing some research work on the proper classi cation on of
Deferred Tax Asset/Liability as Monetary or Non-monetary. Can you
expound on this part of the standard which you said indirectly states that
DTA/DTL are monetary items:
“The standard IAS 12 Income Taxes indirectly indicates that the deferred tax
assets and liabilities are monetary items, because it notes that the exchange
rate di erences on deferred foreign tax liabilities or assets are recognized in
the statement of comprehensive income (par. 78).”
Thanks Ms. Silvia.
 Reply
Justin Michael October 4, 2016 at 12:30 pm

Hi Silvia, I would like to know how one should treat a perpetual bond
(callable) issued as Tier 1 capital in a Bank. Would this be a non-monetary
because Tier 1 is considered capital? or should it be considered as a
monetary item because it is similar to a bond?
 Reply
Silvia M. October 7, 2016 at 10:01 am

Hi Justin,
this is a very interesting question. Now, let me ask you – does
this bond pay some interest? If yes, then you have a compound 
instrument in fact: a principal = that is an equity part, and a
liability
After 2 months, I landed a new = the obligation
position to pay interest.
of IFRS conversion Under
manager withIAS70%
32, you
pay should
rise.
split these 2 parts and account for them separately (equity vs.
liability). Once you do so, then a liability part is monetary and an
equity part is non-monetary. S.
 Reply
Justin Michael October 16, 2016 at 7:26 am

Hi Silvia,
Thanks for your response.
Yes, this instrument does pay interest, however
even the interest is conditional and at the discretion
of the institution issuing the bond. Additionally, non-
payment of interest is not considered an event of
default since it is part of the structure of the bond. I
presume that with these conditions in place that
even the interest portion should be considered
non-monetary. Am I right?
 Reply

In this case, you need to classify this
instrument correctly – debt or equity?
How did the bank classify it – equity, I
guess? As there’s no obligation to
deliver cash, then it’s correct to classify
it as equity and in such a case yes, I
agree, non-monetary. S.
 Reply
Justin Michael October 24,

2016 at 11:02 am
Thanks Silvia, that clari es. 
After 2 months, I landed a new position of IFRS conversion manager

 with 70% pay rise.
JC October 6, 2016 at 9:50 am

Hi Silvia,
if I have investment in subsidiaries and impairment of this investment. Both
are in foreign currency. Which rate should I use to translate the presentation
currency? Thanks in advance.
 Reply

Hi JC,
in your separate nancial statements these are non-monetary
items, therefore use historical rate. If you, for some reason,
translate your nancial statements into some presentation
currency, use the closing rates. S.
 Reply
maria Ngulwa October 27, 2016 at 8:31 pm

hello silvier,
after computing the foreign gain or loss on receivable and payable s using
closing rate what will be the treatment. meaning that ledger to be debited
and credited
 Reply

Hi Maria,
if it’s loss on payables, then Debit P/L – Foreign exchange loss
(or the same expenses as the ones related to your payables) /
Credit Payables. Analogically the remaining items. You get the

idea. S.
 Reply
cody November 4, 2016 at 6:39 am

Hi Silvia
If the company received an amount in foreign currency from a related
company and director, do we need to re-translate the related company
current account and director current at the rate with closing exchange rate
at report date?
As the director c/a comprises of amount in several currencies, it seems it’s
necessary to break down the balance in di erent parts by currencies and
then re-translate. Is this correct?
Thanks.
Cody
 Reply
Veng Dany November 23, 2016 at 3:40 am

Dear silvier,
if the company would like to change functional currency, what will the
company do on Equity part such as retained Earning, share capital and
premium on share capital?
How could the company account on allowance loans loss provision?
Monetary or non-monetary? if it is monetary, what is the journal entry on
gain/loss from the provision?
Thanks.
Dany
 Reply
Silvia M. November 29, 2016 at 6:41 pm


Dearposition
After 2 months, I landed a new Dany, of IFRS conversion manager with 70% pay rise.
when you change functional currency, then you account for the
change prospectively. It means that you should re-translate ALL
ITEMS (including share capital, retained earnings, etc.) by the
rate at the date of change and these translated amounts will be
new historical costs amounts for non-monetary items.
As for the second part of your question – loan loss provision is
monetary, exactly as loans themselves. The journal entry is
simply Debit P/L – Foreign exchange loss / Cr. Provision (or vice
versa, if there’s a gain on the provision).
S.
 Reply
Veng Dany November 30, 2016 at 2:11 am

Dear Silvia,
Thanks so much for your respond.
I have one more question on PPE part. The
company has functional currency is KHR. The
company bought car in 2014 amount 10,000 USD
and exchange rate 4,000 KHR, on that day the
company record the car amount 40 million KHR.
After two years, the company changes functional
currency from KHR to USD in the early 2016, so the
xed asset remain NBV 24 million KHR,
accumulated amount 16 Million KHR exchange rate
is 4,100. Thus, I wonder which amount/exchange
rate should I use to convert to new functional
currency?
Thanks.
Best Regards,
Dany
 Reply 
After 2 months, I landed a new position of IFRS conversion

Silvia M. manager
Novemberwith 70% pay
30, 2016 rise.am
at 11:41
Click here to learnDear
moreDany,
you should still use the rate at the date
of a change. Once you booked your car
in the nancial statements by the
historical rate of 4000, then you can
forget about USD and the car is simply
“KHR” non-monetary asset. When you
change the functional currency, you
translate the car at 4100 rate. S.
 Reply
Joe Yew August 20, 2018

at 4:36 pm
Dear Silvia,
Finally i found a forum that
could answer our question.
It’s a great forum.
Relating to change in
functional currency, if my
understanding to our reply
above is correct, (1) We
translate “ALL ITEMS”
regardless the items are
denominated in USD or
KHR. We just base on all
reported items in KHR as at
the date of change, then
translate everything from
KHR to USD. This includes
Share Capital and Retained
Earning. Hence there will
not be any Forex Reserves. 
(2) How about the
comparative
After 2 months, I landed a new position of IFRS conversion manager with 70%gures?
pay rise.
Should we follow exactly
the translation in (1)?
Thank you

Matt January 14, 2019 at 10:44 am

Dear Silvia,
when changing functional currency, do you also
use the FX rate at the date of change for translating
all the comparatives, or should they be translated
at the earlier balance sheet date rate?
Thank you
Matt
 Reply
Silvia January 15, 2019 at 8:02 am

Dear Matt,
you do NOT restate the amounts in
your functional currency
retrospectively. IAS 21 requires this
change to be accounted for
prospectively – with the amounts
translated at the date of change.
Now, what you are asking is – “how
shall we present our comparatives?” So
in fact, you are dealing more with the
presentation currency rather than
functional currency for the last year.
As you know well, you can select any
presentation currency for your nancial
statements (you don’t even need to
present them in your functional 
currency).manager
After 2 months, I landed a new position of IFRS conversion Thus youwith
would70%simply
pay rise.
restate previous year’s numbers in your
“then-functional” currency to the
presentation currency (your “new-
functional” currency) in line with the IAS
21 rules (all assets+liabilities with the
closing rate; P/L items with the
average rate or the transaction date
rate). I hope it helps! S.
 Reply
Sachin November 23, 2016 at 6:06 pm

Hi Silvia,
In relation to the calculation of PPE additions of a foreign currency
subsidiary in the consolidated nancial statements –
Which method should be used to calculate additions value of the FC
subsidiary balance?
1) Closing consolidated balance sheet exchange rate multiplied by additions
for the year in foreign currency.
Or
2) Exchange rate at time of purchase x value of addition in FC. (the
di erence between the closing rate and rate used to be shown as FX
translation)
This is only a problem when you consolidating a foreign currency subsidiary
to Group reporting currency.
PS: If method 1 is used > PPE additions may not tie to the cash ow
statement.
 Reply
Silvia M. November 29, 2016 at 6:46 pm 
Dearposition
After 2 months, I landed a new Sachin, of IFRS conversion manager with 70% pay rise.
I know exactly what you mean and believe me, I saw more
methods of doing this. However, additions are a “movement”
item and therefore they should be translated at the dates of
transaction (see also IAS 7,par. 25). Any di erences are reported
as CTD (currency translation di erence). Also, this is going to tie
with your statement of cash ows, believe me S.
 Reply
Linh Luong November 28, 2016 at 12:04 pm

Related to the monetary vs non-monetary item, please help me this case:
At 1/1/2016:
Company A & Company B sign 2 contracts:
Contract 1: A sells machine to B, value: 200 million USD.
Contract 2: B will pay for the contract 1 by delivering 120.000 tons of
Cashewnuts to A in 7 years.
The question is: In the Balance Sheet of B, is the payable 200 million USD
monetary or non-monetary? And at 31/12/2016, the payable will be
recognised at the closing exchange rate.
My opinion:
Based on IAS 21: “A right to receive or obligation to deliver a xed or
determinable number of units of currency is monetary item”, B’s obligation is
not have to pay a number of units of currency, otherwise, B will pay a
number of goods=> This payable is non-monetary items => Therefore, it will
not be recognised at the closing exchange rate, but using the exchange rate
at transaction date.
So, is it correct?
 Reply
Silvia M. November 30, 2016 at 10:53 am
Dearposition
After 2 months, I landed a new Linh, of IFRS conversion manager with 70% pay rise.
this is a very interesting question.
I agree it’s a non-monetary liability, but I do not agree to keep it
at historical cost. In fact, you have a sale of cashews that was
paid by the machine. The fact you accepted the payment for
cashews (machine) 7 years before their delivery means that you
have 2 things to deal with:
– you have a contract liability (look to IFRS 15.par.106), and
– there is a signi cant nancing component involved (as
delivery happens 7 years after payment).
Therefore, instead of mere keeping the liability at historical rate,
you should think about discounting, recognizing interest income
each year and then also – think about the fair values. I guess
company B is the producer of cashews and they need to be
reported at their fair value at the end of the reporting period
(look to IAS 41). As the contract liability is tied with cashews, it
would be appropriate to do the same. Not easy!
 Reply
Linh Luong November 30, 2016 at 11:24 am

Thank you Silvia, I really appreciate. I will consider
what you advised. Then if I have more questions,
please help me!
 Reply
Jonathan SK November 29, 2016 at 1:35 pm

Hi Silvia.
We are currently auditing a Group which has Investment in an associate in
foreign currency.
The Investment in Associate is a non-monetary item.

After 2 months,ItIislanded
accounted
a newforposition
using the
of cost
IFRSmethod for parents
conversion managernancials,
with 70% and equity
pay rise.
method for the consolidated nancials.
My Question: For consolidation purposes, the client has revalued this
investment and the corresponding revaluation gain/loss is set o against
the carrying amount of investment (equity method as done for share of
pro t/loss in associate).
Kindly advice is the foreign currency investment in associates can be
revalued at closing rate and the e ect shown under the investment?
 Reply
Silvia M. November 30, 2016 at 11:26 am

Dear Jonathan,
for consolidation purposes, you should translate investment’s
nancial statements to presentation currency using the closing
rate for assets/liabilities and average rate for income expenses.
Here, CTD – currency translation di erence within equity arises.
Then you apply the equity method as usual. S.
 Reply
Jonathan SK December 14, 2016 at 12:02 pm

Dear Silvia
Thanks for your reply.
Could you kindly clarify what it means by “CTD –
currency translation di erence within equity”?
Let me rephrase my query: Investment in an
Associate on 3 Jan 16 of USD 1m, recognized as
GBP 789K at initial recognition by the Parent.
So at year end would the USD 1m need to be
revalued/translated again at closing rate with an
exchange gain/loss a ecting the initial Investment

After 2 months, I landed a new positionofofGBP

IFRS789k? along with
conversion the share
manager withof70%
pro pay
t/loss
rise.
during the year (equity method)?
 Reply
Silvia M. December 16, 2016 at 12:09

pm
Jonathan,
in parent’s separate nancial
statements, you do nothing, because
as you wrote, it is stated at cost (= at the
historical rate, as this is non-monetary
asset).
In consolidated nancial statements,
you need to translate associate’s
nancial statements rst. You take its
balance sheet – apply closing rate to
everything. You take its P/L – apply
average rates to everything. If you do it
right, you will nd out that the balance
sheet does not balance (because you
used di erent rates for balance sheet
and pro t or loss). This di erence is
CTD.
When you have the nancials of
associate stated in parent’s functional
currency, there you go – apply the
equity method.
So no, you do NOT revalue the USD 1
m. – you do it as I’ve just described. S.
 Reply
Jonathan SK December 18,

2016 at 4:01 pm

Thanks a lot Silvia.
Appreciate
After 2 months, I landed a new position of IFRS conversion manager with your helprise.
70% pay on
this.

jeyam December 4, 2016 at 7:39 am

Dear Silvia,
One of our client’s functional currency is USD, but presentation currency is
SGD, so while translating all income , expense to present in the Financial
Statements(FS) do we have to use spot rate of SGD-USD and year end rate
of SGD-USD to translate monetary item’s for presenting in the FS in SGD,
which makes the process sound tedious, also will this a ect the forex
gain/loss.please enlighten me in this regards..
 Reply
Silvia M. December 6, 2016 at 11:15 am

Dear Jeyam,
once you have your nancial statements in USD, then at the
year-end, for presentation purposes, you should:
– translate all assets and liabilities with the closing rate
– translate all items of expenses and revenue with the
transaction date rate (spot), but to be more practical, you can
use the average rate during the period.
There will be a di erence and your balance sheet will not
balance, because you use di erent rates (year-end for
assets/liabilities and average for P/L) – you show this
di erence at CTD (currency translation di erence) in equity. S.
 Reply
jeyam December 9, 2016 at 8:09 am

Thanks a lot Silvia, do you have any CPD Courses
for ACCA-especially for FRS 37, FRS 11 and FRS 18 
After 2 months, I landed a new positionofReply

IFRS conversion manager with 70% pay rise.

Silvia M. December 9, 2016 at 8:58 am
Dear Jeyam,
I have covered these areas in my IFRS
Kit – and yes, it counts for CPD. S.
 Reply
Derek December 12, 2016 at 5:13 pm

Hi Silvia,
Excellent article, vrey useful.
Question: We are a new start with a functional currency of Euro (salaries etc.
paid in Euro). However, given the complex nature of the company we have
been unable to get a Euro bank account set up as of yet. We have the use of
a USD intermidiary for now. We are paying Euro supplier invoices out of the
USD a/c.
Should I:
(a) Post to both the bank GL and trade payable (TP) in USD and drive the FX
from the TP to the P&L, or
(b) Post the Euro invoice value against both the bank GL and TP and
translate the bank GL at month end closing rate, bringing the exchange
di erence to the P&L?
 Reply

Hi Derek,
when you get the invoice, you normally book it in EUR (no USD
bookings). However, the problems arise when paying the
invoice from USD account. When you pay the EUR amount,
then the bank automatically translates the EUR amount to USD

– so use
After 2 months, I landed a new this rate
position for booking
of IFRS the payment.
conversion manager At the70%
with endpay
of the
rise.
reporting date, only the remaining balance on USD account is
translated to EUR and the di erence is brought to P/L.
 Reply
Sinu December 15, 2016 at 3:50 am

Hi , i need to know that investment in shares are nonmonetary assets. Then
how is it not an intangible assets as per IAS38? Please clarify me
 Reply

Hi Sinu,
I don’t understand your question. Intangible assets are de nitely
non-monetary – it’s also shown in the table above. S.
 Reply
Je December 27, 2016 at 7:11 am

My company is holding company. These nancial statements are presented
in United States Dollar (US$), which is the Company’s functional currency. As
at 22 April 2016, we investment a subsidiary. The subsidiary company’s
functional currency is Indonesian Rupiah (IDR).The subsidiary company
incorporate on 01 January 2016.
My question is should the historical rate of share capital for subsidiary
company be the rate the date of incorporation or date of investment?
 Reply
Juan Luis January 13, 2017 at 10:42 pm
After 2 months,Dear Silvia,a new position of IFRS conversion manager with 70% pay rise.
I landed
For a company under IFRS that buys its inventories in foreign currency,
revaluation of that goes to P&L? All purchases between related parts.
 Reply
Silvia M. January 14, 2017 at 7:53 am

Hi Juan, I think this article can give you the answer. S.
 Reply
alwadabi January 16, 2017 at 1:05 pm

Dear Silvia,
I have a query. Unbilled Revenue in Foreign Currency Monetary or Non
monetray assets ?
We record sales at point of delivery .payment terms like 50% advance 30 %
on delivery , 10% after 1 month of delivery, 10% after 2 month of delivery. on
delivery, we book the sales account at 100 % value . Dr. Customer a/c credit
:sales
later we transfer 20 % of sale value to unbilled revenue .after 1 month or 2
month we transfer amount from unbilled revenue to Customer Account(
Using exchange rate on the date of Transfer). My doubt here the unbilled
revenue is monetary or non-monetary ?
 Reply
Valentin January 30, 2017 at 9:09 pm

Hi, I hope someone could help me remind which are posible non monetary
assets and liabilitys.
Are “holding for trade liabilities”, “derivative liabilities”, “non derivatives
liabilities with exposition hedged by derivatives” good examples? Are they
all? And what about the Assets?
 Reply 
James Kennedy Click

February
here3, to
2017 at 3:34
learn pm
more
Hi Silvia, if a UK Company has a $20m USD loan which, translated last
nancial year end equals £15m. If this year it translates at £17m. Is the double
entry as follows:
Dr Other Comprehensive Income Reserve £2m (P&L)
Cr Bank Loan £2m
?
 Reply
Derrick February 6, 2017 at 10:56 am

Hi, i would also like to nd out something. Shareholder loans are ideally a
form of equity right? Should these be considered as monetary
assets/liabilities. If not should repayments have the element of Exchange
gain/loss if these where issued in foreign currency?
 Reply
Todd February 23, 2017 at 10:54 pm

Hi Silvia – appreciate your time on the subject! My question is related to
intercompany transactions. Our functional MXN entity has a long term loan
payable in USD. For the revaluation, we are placing in OCI, but my question
relates to capitalizing interest on a monthly basis. Would the USD interest
we are capitalizing to principal be entered at the rate on day of
capitalization, or does it make sense to move the net MXN amount from the
prior month?
 Reply
Armughan March 13, 2017 at 3:24 am 

Silvia-i have
a newlittle confusion
position thatconversion
of IFRS how a bankmanager
loan is monetary
with 70%liability?
pay rise.
suppose i got 100 dollors loan from bank on 10% interest with 1 year validity.
After on year i will pay 110 dollors rather than 100 dollors, in this case in
terms of unit of currency is not x. please explain it thanks:)
 Reply

Dear Armughan,
yes, it is a monetary liability, because at the end, you will need
to pay cash. And, it’s OK that it’s not xed – it’s at amortized cost,
isn’t it? S.
 Reply
Armughan March 24, 2017 at 12:42 pm

Hi Silvia-thanks for your appreciable answer.You r
best. Now you have become my best teacher, God
Bless You.
My next questions is regarding ‘Going concern
concept’ i have searched much more to know that
why this concept have two title one is ‘assumption’
and the other one is ‘principle’and why this is
concept is assumed and who assume it?
My thinking is that as a principle it must be followed
then there should be no chance to assume it.who
assume it he must be believe that as a principle it
has been followed in preparing nancial statement.
 Reply
Tera March 16, 2017 at 1:59 am

Hi Silvia,

After 2 months,Thank youafor

I landed newtheposition
amazingofarticle. Can you domanager
IFRS conversion one for temporal
with 70%method vs
pay rise.
current rate method with some examples as well?
Thank you,
 Reply
Brad March 20, 2017 at 10:40 am

Hi Silvia, could you please explain how to account for equity investments in
a foreign currency?
As an example I have a functional currency of ZAR and bought one USD
Apple share as follows:
I paid ZAR 1820 for one Apple share when the share price was USD 140 –
That means the exchange rate was 13:1 on purchase date.
On month-end the USD share price is USD 145 and the ZAR exchage rate is
15:1 – For accounting purposes I have chosen to account for the share price
movement in a non-distributable reserve (NDR) and take USD 5 x ZAR 13 =
ZAR 65 to the NDR account.
Can I account for the actual ZAR movement from ZAR 13 to ZAR 15 in pro t
and loss? (ZAR 2 x USD 140 = ZAR 280 loss accounted for in pro t and loss)
Given the example above, all I want to know is if the share price movement
(140 to 145) needs to be accounted separately from the currency
movement(13 to 15), or if it all goes to one account?
Thank you!
 Reply
Silvia M. March 20, 2017 at 12:12 pm

Dear Brad,
1 Apple share would be classi ed as other investment, being
the nancial instrument under IFRS 9 (not a subsidiary, not an
associate). In general, it is a non-monetary asset. However, for

most shares (equity instruments), IFRS 9 prescribes revaluing
themposition
After 2 months, I landed a new at fair value.
of IFRS conversion manager with 70% pay rise.
Therefore, the fair value of your investment at the end of the
month is 145*15=2 175 ZAR, its cost was 140*13=1 820 ZAR
(assuming it was equal to its fair value at the acquisition date),
so the di erence of 355 ZAR is a FV change.
You should treat the foreign currency di erences as a part of
the fair value change.
How to recognize the fair value change?
This depends on how you classi ed this equity investment
under IFRS 9. Is it at FVTPL? Or FVOCI? What is the purpose of
holding the share?
Making long story short – if you classi ed at FVTPL, then book
355 ZAR in pro t or loss, if you classi ed at FVOCI, book 355
ZAR in other comprehensive income (not “non-distributable
reserve” – no such a term in IFRS). S.
 Reply
Tharun Krishnamoorthy March 22, 2017 at 8:38 am

Mam,
Kindly explain why Provisions for employee bene ts are classi ed as
Monetary Item?
 Reply

The reason is that you will have to settle the provision in cash
one day, isn’t it? S.
 Reply
Ercik April 10, 2017 at 1:03 pm
After 2 months,Thanks forathis

I landed new article, Mam.
position of Would you explain
IFRS conversion what should
manager OCI classi
with 70% ed
pay rise.
as? Non monetary or monetary? Should i used closing rate or average rate
for remeasurement of OCI?
Thanks.
 Reply
Silvia M. April 11, 2017 at 7:14 pm

Ercik, are you asking about the revaluation to the presentation
currency? In this case, I strongly recommend reading this
article, it answers your question. If you are revaluing to
functional currency, use historical rate, i.e. as for non-monetary
item – this is said in general. S.
 Reply
Reema April 14, 2017 at 6:40 am

Sir when we have no historical cost Bt we have opening rate average rate
and closing rate… That time which rate applying on nonmonetary asset and
liability???
 Reply
Silvia M. April 17, 2017 at 7:14 pm

Dear Reema, I think you should have a historical cost, because
that’s the amount at which you recognized the asset or liability
for the rst time, isn’t it?
 Reply
Wendy April 28, 2017 at 1:24 am

Hi there,
Great site! Is a sales agreement to deliver equipment in the future
considered a monetary item? 
Reply a new position of IFRS conversion manager with 70% pay rise.
After 2 months,I landed

Silvia M. April 28, 2017 at 8:40 am
Hi Wendy,
how is this sales agreement recognized in the nancial
statements? Do you have any assets or liabilities resulting from
this agreement recognized in the balance sheet? Because, in
most simple cases, there’s nothing recognized and as a result,
there’s no monetary or non-monetary item. S.
 Reply
Nelao May 8, 2017 at 3:57 pm

Hi Sylvia? Thanks for the information. It really is helping.
Can you please explain to me why intangible assets are classi ed as non-
monetary?
 Reply

Hi Nelao, for the same reason as property, plant and equipment
– i.e. there’s no right to receive cash. S.
 Reply
Sree May 10, 2017 at 6:21 am

Hi Silvia,
Am working with a client in Belgium whose parent
company is Chile. So, EUR is accounting currency
whilst USD reporting currency. The client is
adopting IFRS. However, when preparing their
Financials in USD, they are translating inventory and
COGS at “Transaction rate”which is actually not a
mandate per IFRS. When asked client says, that 
After 2 months, I landed a new positionusing thisconversion

of IFRS method they get more
manager accurate
with forex
70% pay rise.
impact in their books. What is your
recommendation?
Regards,
Sree
 Reply
Silvia M. May 11, 2017 at 9:47 am

Dear Sree,
this method is simply not under IFRS, it
is contrary IAS 21. It is NOT permitted to
depart from IFRS if you think that “it’s
more accurate”. Unless they apply IAS
21 properly, they cannot mark their
nancial statements as under IFRS (or
compliant with IFRS). Or, an auditor
should issue a quali ed opinion (I guess
you were talking about translating from
functional to presentation currency). S.
 Reply
Kurt May 14, 2017 at 8:11 am

Hi
so for non-monetary items do we need to reaccount for the exchange rate
at 30 June? even if they pay for the item in the next nancial year but
purchased it before 30 June?
 Reply

No, for non-monetary items, you leave them as they are, in the
historic rate. S. 
 Reply
Vishal May 15, 2017 at 8:18 am

Hi Silvia, As per IAS 21, Monetary item is if it gives right to receive or
obligation to pay xed or determinable number of currency units. so
consider it how deferred income can be a non monetary item as one can
determine the amount of income which though does not belong to current
period but belongs to future period but the amount is certain & xed.
 Reply
Jack May 20, 2017 at 1:29 pm

Hi. Our company have loan agreement in USD (which is not our reporting
currency). Considering the fact that contractual rate of the loan is
decreasing, however for IFRS purposes we use e ective interest rate,
currently we have positive gure in interest payable (kind of we have paid
more than we incurred). Should this amount be revalued or not? if not,
which rate we should use for the interest expenses incurred at the next
period for which we already paid?
Thank you in advance.
 Reply
akshita goel May 24, 2017 at 1:34 pm

Is External commercial borrowing monetary or non monetary item?
 Reply
Monetary, as there’s the obligation to deliver cash.
 Reply
Mukunda Bhusal June 15, 2017 at 9:46 am

Hi Silvia i need your help for accounting FCY share capital injection.

After 2 months,Our Company

I landed X functional
a new position ofcurrency is NPR. We
IFRS conversion have received
manager with 70%contribution
pay rise.
from abroad shareholder against pref. share capital in USD. Our local bank
has provided certi cate of cash injection in NPR 102.8/USD. Exchange rate
for our recording purpose is 103.26. We allot shares to our shareholders in
NPR in future. Our main concern is what is the historical rate for us and
appropriate accounting?
Further we have to register FDI in central bank, however the same rate will
be 102.80.
 Reply
je June 16, 2017 at 11:36 am

Hi Silvia,
what if our company received training fee in advance for 1 year,and we
record it as deferred revenue, but the contract said if there is termination we
have to refund the fee that we received in advance proportionally. eg.
number of days elapsed in one year, a 365 days per year as basis
computation.
based on the nature of the contract is it monetary or non monetary?
Thank You
 Reply
Fisi June 21, 2017 at 6:45 pm

Hi Silvia,
Thank you for this write up. However, i have a question as follows:
There is an Long Term Loan in USD from a related party (a subsidiary within
the same group).
Is this a monetary or a non-monetary item?
Should the loan be revalued at the closing rate of the local currency?
Thank you in advance for your response.
 Reply
Silvia M. June 21, 2017 at 7:35 pm 
Monetary.
After 2 months, I landed a new Yes,ofit IFRS
position should.
conversion manager with 70% pay rise.
 Reply
Olga July 12, 2017 at 8:33 am

Dear Silvia
Please help to identify whether the VAT receivable is monetary account. We
are eligible to net o the di erence between input VAT and output VAT.
Therefore we get cash for di erence. However, for those VAT output
claimed back which were not con rmed by Tax Authorities (due to
paperwork) we can claim the balance to be netted without cash return.
While it sounds like non-monetary, there is still option to get cash for part of
the built VAT receivable.
Thank you in advance
Olga
 Reply
Olga, this is a monetary account, because in fact, you have the
right to receive cash (although it’s technically netted o with
your next VAT payable). S.
 Reply
Sonam Cheden July 22, 2017 at 5:49 pm

Hi Silvia
The company i am working have a loan in foreign currency which was
translated into presentation currency using year end rate and the di erence
was recognised in P&L account , unfortunately in our
case it was loss. Now while ling tax returns our tax authority is not allowing
us to claim this as an expense since we have not started repayment. I would
appreciate as to what is the rule in your country.
Thanks and looking forward to your response.

After 2 months,Sonam Choeden

Bhutan
 Reply
Max August 2, 2017 at 9:09 am

Hi Silvia,
Is retained earnings monetary or non-monetary? Do we need to translate
retained earnings in foreign currency using closing exchange rate at the
reporting date?
 Reply
Non-monetary. If you translate transactions to the functional
currency – No.
 Reply
Matt S September 22, 2017 at 4:50 pm

Hi Silvia,
My company (GBP functional currency) has an equity accounted investment
in a third party who reports in Euro’s. Our initial investment and subsequent
share of their net income have been recorded in Euros in our books, which
are converted to a GBP equivalent using the rate on the day.
My question is, should we revalue our investment using the month end rate?
Many thanks in advance.
 Reply
Silvia M. September 22, 2017 at 5:02 pm
Hi Matt, in general, equity investments are non-monetary items
and they should not be revalued, but kept at historical cost. S.
 Reply

After 2 months,Lael Kuitakwashe

I landed September
a new position 26, conversion
of IFRS 2017 at 8:26manager
am with 70% pay rise.
Hi Silvia
My question is on whether exchange di erences should be disclosed above
earnings before interest, tax & depreciation (EBITDA) or it should be
disclosed below EBITDA.
What determines such disclosure options?
With thanks.
 Reply
Lael, let me tell you that IFRS do not state the exact order of
items in your pro t or loss, they just state the minimum content.
Also, EBIDTA is not de ned in IFRS as it is non-accounting
measure. However, logically, you should report forex di erences
in the same line as the items to which they are related. For
example, if it’s forex on translation of payables resulting from
operating activities, then forex di erence should be reported
within EBIDTA (not below). S.
 Reply
Lael Kuitakwashe September 28, 2017 at 6:29 pm
Thanks Silvia. Much appreciated.
 Reply
Ivan Oliva September 27, 2017 at 4:42 am

Good day! Can I ask what is the proper rate that I should apply when I
translate a NON-ADJUSTING subsequent event but requires disclosure. My
client contracted a signi cant lease liability after the balance sheet date but
before the audit report, therefore there would be no lease liability in B/S.
But how should we present the transaction at the Notes? Should I still use
the B/S closing rate or the date of contract rate with explanation
appendage?
 Reply 
Hi Ivan,
After 2 months, I landed a new IFRS do
position of not
IFRSstate anythingmanager
conversion about thiswith
particular
70% pay rise.
circumstance, so just translate it with the transaction date rate
and give appropriate explanation. S.
 Reply
Freddy October 9, 2017 at 5:33 pm

Hello! I have a question regarding a deferred tax liability valuation. We have
an asset valued, booked and depreciated in USD, but we pay taxes in EUR.
How should we value the deferred tax liability? Is this USD because this
results from the book value and depreciation or is the currency triggered by
the payment currency towards the tax authorities? In other words, do we
need to revaluate the deferred tax liability over the coming decades
through pro t and loss (or OCI?).
 Reply
Hello Sylvia, could you please support me with the question?
Thanks Freddy.
 Reply
Hi Freddy, sorry for omitting your question earlier.
My question is – what is your functional currency?
Is this EUR or USD? It’s not clear from your question.
Anyway, as the asset is probably PPE, it should be
stated in the historical cost translated to your
functional currency by the historical rate and then it
does not move. If your functional currency is EUR,
then you simply book deferred taxes in EUR. If it’s
not EUR, then you would still calculate the tax in
EUR and translate it at the closing rate at each end
of the reporting period (it’s monetary item). S.
 Reply

No problem.
After 2 months, I landed a new position of IFRS conversion Thanks
manager for 70%
with the answer
pay rise.
Sylvia. The functional currency of the
company is USD. The deferred tax is
currently booked in EUR and the asset
is indeed PPE. Revaluations of EUR to
USD takes care for uctuations in the
P&L. Is there a way to include these
uctuations in OCI as the deferred tax
position relate to future years? Thanks
Freddy.
 Reply
Freddy October 23, 2017 at
3:29 pm
Just to make sure that you
have all the facts; the
corporate income tax
return of the company is
also in USD calculated.
Ultimately the nal tax
liability is translated from
USD to EURO in the year of
reversal of the deferred tax
(realization).

Silvia M. October 23, 2017
at 5:15 pm
OK Freddy, so why are you
paying tax in EUR and how
do you calculate your
current income tax? Do
you rst translate all
income/expenses to EUR
and then translate? Can 
you describe?

 with 70% pay rise.

Sylvia, thanks for the support. We use the nancial gures of the company in
USD for the corporate income tax return. The scal balance and P&L are
based on the aforementioned nancial gures in USD.
The taxable amount is determined rst in USD based on a USD balance and
P&L. The ling of the corporate income tax return in a foreign currency in
this case USD has been granted by the tax authorities (country in Europe).
The amount of corporate income tax due is denominated in Euros. For
purposes of determining this amount, the functional currency taxable
amount in USD is converted into Euros using the average currency
exchange rate of the nancial year.
 Reply
Louie Zuniga January 5, 2018 at 9:46 am

Hi Silvia, is a creditable withholding taxes a monetary or non monetary item?
 Reply
Silvia January 5, 2018 at 12:07 pm

Monetary.
 Reply
Viktoria Krasteva January 26, 2018 at 4:14 pm

Hi Silvia,
Very useful information – thank you!! I am now using your website as a
regular reference tool.
After 2 months,I have a quick

I landed questions
a new positionfor
ofyour
IFRS–conversion
I understand that preferred
manager shares
with 70% pay that
rise.
considered a liability by the issuer are considered a monetary item. How are
the same shares considered by the holder – are they an investment in
associate and therefore non-monetary or are they a loan receivable and
therefore monetary??
Thank you in advance for your help!!!
 Reply
Nick January 30, 2018 at 8:57 am

Hi Silvia,
Great article. How is GRNI classed? I have a situation with stock in transit
where the inventory has been recognised along with a liability (invoice not
yet received so GRNI). Is the associated liability non-monetary because it
relates to inventory or monetary because it is a trade payable?
Thanks in advance!
 Reply

Hi Nick, it’s monetary, because it is not tied to inventory
anymore – there’s the obligation to make a payment after all. S.
 Reply
Nick January 30, 2018 at 9:29 am

Thanks!!
 Reply
Areal February 5, 2018 at 10:00 am

Dear Silvia,

Good day.
After 2 months,I do facingasome

I landed special condition
new position for monetary
of IFRS conversion and non-monetary
manager with 70% pay rise.
categories argument from my client.
As your article mentioned, Cash and bank balance, Trade receivables and
Trade payables are consider monetary item. Under FRS 21, monetary item
should be revalue as at closing rate for each nancial year end.
However, my client is operated as a reinsurance broker company and they
claim that the premium and claims they receive on behalf from/to client is
consider non-monetary item (the company act as middle man), therefore,
the management are not willing to recognise the unrealiased foreign
exchanges gain/loss to pro t and loss account, but wish to presented it as
“New liabilities account”. (P/s : Functional currency : SGD, The bank a/c is in
USD)
Please advise how should I reply my client about the above scenario. Thank
you in advance.
From : Areal
 Reply
Silvia February 5, 2018 at 10:26 am

Hi Areal,
the broker acts here as an agent, but they still have the right to
receive cash from the end customers (premiums) and the
obligation to transfer cash to the insurance companies
(premiums). The same for the claims: They still have the
obligation to pay to end customers and at the same time, the
right to receive cash from the insurance companies – if this is
the way it goes. Therefore, all these receivables and payables
from claims and premiums are monetary. I just wonder what
their argument is. S.
 Reply
Areal February 5, 2018 at 11:12 am

Dear Silvia, 
After 2 months, I landed a new positionThank youconversion

of IFRS for your prompt response.
manager Really
with 70% pay rise.
Appreciated.
The point for their argument is they not willing to
post the unrealised gain/(loss) to Pro t and loss
accounts for the bank account year end valuation
(from USD to SGD @ closing rate). Its would
signi cant if the Bank account balance as at year
end is few million and the exchange rate USD vs
SGD is drop.
If they keep the valuation di erence at Balance
sheet, then the pro t and loss account would
appear net pro t instead of net loss.
Thanks and regards,
Areal
 Reply
Silvia February 5, 2018 at 11:19 am

Areal, IFRS is quite determinative and it
does not take into account this type of
talk (if it’s negative impact, we don’t do
it…). In fact, they want to depart from
IFRS due to negative impact, thus they
want to hide losses. I am sorry, but
that’s not how to do this. S.
 Reply
Areal February 6, 2018 at

2:03 am
Dear Silvia,
Yes. Noted with thanks. I
will do the right things and
stand to the right points 
instead.with 70% pay rise.

Click here to learn more Best regards,

Areal

So a February 7, 2018 at 2:16 pm

Hi Silvia,
thanks for this article. I have a question regarding IFRS 16 where the
contract and lease payments are expressed in a currency which is di erent
than the functional currency. The lease liability is monetary, but what about
the right-of-use (ROU) asset and the amortization? If they are non-monetary
as intangible assets are, during the lease term at every closing date the
lease liability would change because of changes in the exchange rate, while
the ROU would remain the same. Is that correct?
 Reply
Luna February 23, 2018 at 9:30 am

Hi Silvia,
Can the company revise the re-calculate at the beginning of next year? If it
can, the (unrealized) currency translation income/loss goes to P&L??
When can the company recognize that unrealized currency translation
income/loss goes?
Many thanks in advance!
 Reply
Makungo Mwila April 5, 2018 at 10:46 am

Hai,
From your thoughts on Share capital in a foreign currency i have a question,
does this treatment also apply on available for sale equity investments?? 
Rama April 14, 2018 at 7:25 pm

Hi Silvia. Great article. D
1. Do all monetary assets qualify as nancial assets and vice versa?
 Reply
Silvia April 19, 2018 at 10:35 am

Interesting question and my answer is no. Just as an example –
deferred tax asset is monetary and it is NOT a nancial asset.
 Reply
Kashif Jamal May 9, 2018 at 11:21 am

Hello Silvia,
Hope you are doing well.
My question pertains to application of conversion rate on Share Capital and
other parts of equity.
Can you please specify what rate shall be used to convert the Share Capital
as of Balance Sheet date. Also, can you please refer the relevant section of
IFRSs to evaluate the basis.
Further, what are the basis to classify Share Capital as non-monetary item.
Regards,
 Reply
Silvia May 9, 2018 at 2:21 pm

Hi Kashif, I think I answered your question in the last paragraph
of this article. Also, you can nd some insights and thoughts
here. S.
 Reply

After 2 months,Mira
I landed
May a18,new
2018position
at 12:10 of
pmIFRS conversion manager with 70% pay rise.
Click
Hi Silvia. could you here
please to learn
advise more question: For the xed assets
on following
purchased in foreign currency which exchange rate I should use? Usually I
capitalize asset in USD when it was delivered to warehouse (Goods receipt
(GR) is created in the system) using exchange rate for the date of GR. After
several month when I receive nal invoice should I recalculate the value of
asset according to exchange rate of posted invoice and updated the value
of assets for di erence?
 Reply

Hi Mira, thanks for writing me! I think that this article exactly
answers your question. S.
 Reply
Said July 9, 2018 at 10:10 pm

Hi Silvia,
Please clarify on the following;
A local company in Malawi receives a loan from a foreign company in USD
for the purchase of goods and services from suppliers, contractors of
consultants to facilitate the construction of an asset.
The loan of say $1 million is being disbursed in installments of varying
amounts over a period of 5 years. After 5 years the loan will be fully
disbursed and asset will be capitalized once its complete and in operation.
The loan will then be repayable in the next 20 years with 2 payment per
year on xed dates and amount.
Please clarify on the following;
– Is this monetary or non-Monetary item?
-How should the loan and forex be treated during the 1st 5 years when
disbursements are being received?Assuming valuation is done every
reporting period should the revaluation go to revaluation loan/curreny

reserve in equity or unrealised forex
After 2 months,-once payments

I landed a new commence the loan/borrowing
position of IFRS will bewith
conversion manager split70%
between non-
pay rise.
current and current portion; how should the non-current portion be valued
(through revaluation loan/curreny reserve in equity or unrealised forex) as
for the current portion i think forex will be realized on the date of payment
Please guide
 Reply
Silvia July 10, 2018 at 7:15 am

Hi Said,
very shortly – the loan is monetary, but the asset is non-
monetary. Once you recognize them in your nancial
statements, they live their own life. So, you will retranslate the
loan with the closing rate at each reporting date (forex
gain/loss mostly to pro t or loss, but you capitalize a part of it
as borrowing cost to the cost of asset under construction –
please see below) and you will keep the asset at the historical
price.
Now, I can’t give you detailed answer in the comment (it would
give a whole article), but for the guidance:
– Here, you can read how to capitalize the asset when the
foreign currencies are involved. It is asset acquired on
prepayments, but the principles are the same for the loan, too.
– Here, you can nd a little piece on how to capitalize the
foreign exchange di erences on loan as borrowing cost to the
cost of an asset.
 Reply
Victor July 12, 2018 at 10:26 pm

Hi Silvia
When one is not able to nd a solution on peculiar accounting issues, they
have only one way to run- towards you- to have a simpli ed understanding. 
After 2 months,My query isa new

I landed as follows- Company
position maintains accounts
of IFRS conversion managerinwith
USD.70%
Sharepaycapital
rise.
is in EUR. On the day of share capital infusion, the share capital is shown in
the balance sheet in USD (because accounts must be maintained in USD)
on the forex rate (EUR:USD) as applicable on the day when share capital is
actually transferred to the company’s bank account. At the end of each
nancial year, the share capital is valued and the forex is shown in the
reserve so that the net equity (shown in EUR) remains same as was infused.
(QUESTION 1- is this the correct way of accounting? If not, what is the
correct manner).
After few years, shareholders decided to reduce the par value from 100 to
96. So 4% share capital needs to be returned back to shareholders. As the
original infusion was in EUR so the shareholder needs 4% reduction and
refund in EUR only. Considering that accounts are maintained in USD so
there will be a forex impact due to EUR share capital reduction. I believe this
results in forex realization on the date when the share capital reduction
actually took place and on the forex rate applicable on the date of
reduction. If the share capital is reduced, reserves should also be reduced.
(QUESTION 2- where and how this forex realization should be shown?
Should it be part of Other Comprehensive Income or should it be part of
Other Reserves? Can you please provide the recording entries? I believe 2
accounts which will be a ected by the forex are: Forex Resevers maintained
in the balance sheet showing the forex valuation of foreign currency capital
and the second account will be forex realization account in Other
Comprehensive Income showing the a ect of realized forex on capital
reduction)
Please advise.
 Reply

Hi Victor,
thank you for this question. It is quite long to cover in one
comment, but I’ll try to cover it in one of my podcast articles
within the near future – check out here. S. 
 Reply

Victor July 14, 2018 at 4:25 am
Thanks a ton Silvia
 Reply
DEME GEBREYESUS August 31, 2018 at 12:42 pm

Hi Silvia! Thanks for all the information that you share with us.
 Reply
sajid September 14, 2018 at 11:26 am

G8 explanation, loving it.
 Reply
Tunn Yuan September 18, 2018 at 7:06 am

Hi Silvia, I was wondering if there is any provision that allows non-monetary
items to be converted at a rate other than historical rate (assuming that the
company might not know what was the historical rate used in the
beginning). I was not able to identify any such provisions in FRS 21. Hoping
you could help! Thank you.
 Reply
Subodh September 30, 2018 at 7:04 am

Hi Slivia
I have some unquoted non current investment in Prefernce share and
mutual fund , how can i present in nancial statement as per IFRS nanical
instrument . 
Ozar October 8, 2018 at 3:44 am

is investment in a mutual fund a monetary or non monetary item
 Reply
Silvia October 9, 2018 at 9:10 am

Hi Ozar, it is similar as shares (equity investments) – please look
to the above table
 Reply
FRANCINE N'ZI-YAO October 9, 2018 at 9:35 am

Hi Sylvia,
Thank you for your explanation. I have 2 questions
– Are investments in subsidiairies non-monetary items ?
-For consoldiation purposes, should them be converted at the closing rate
or keep at the historical cost
-If I am converted the standalone accounts to IFRS, should I use the closing
rate or the historical cost
I am a little bit confused with thes sentences:
” ‘It’s not so important when you consolidate and you need to translate some
foreign subsidiary to your own presentation currency, right?
Why?
Because, the rules in IAS 21 The E ects of Changes in Foreign Exchange
Rates say that in such a case, you translate all your assets and liabilities by
the closing rate. That’s clear.”
Thank you for your feedback
 Reply

Silviaposition
After 2 months, I landed a new Octoberof9,IFRS
2018conversion
at 9:40 am manager with 70% pay rise.
Hi Francine,
please do not be confused with individual separate nancial
statements and consolidated nancial statements. In individual,
investment in subsidiary is an equity investment and thus it is
non-monetary. In consolidated, it is di erent – you need to
translate the nancial statements of subsidiary by the closing
rates as shown in this example. S.
 Reply

What a quick and clear answer!Thank you so much.
you are amazing!
 Reply

Hi Sylvia,
Many thanks for the explanation. I have the following questions:
– For consolidation purposes, as investments in subsidiaries will be
eliminated. Is it necessary to make the conversion?
-If we consider the standalone level, for a conversion from a framework to
IFRS, investments in subsidiaries are non-monetary items? Then, do we
need to convert to the closing rate or keep it to the historical cost?
I am a little bit confused with the following ;
t’s not so important when you consolidate and you need to translate some
foreign subsidiary to your own presentation currency, right?
Why?
Because, the rules in IAS 21 The E ects of Changes in Foreign Exchange
Rates say that in such a case, you translate all your assets and liabilities by
the closing rate. That’s clear.

 Reply
Silvia October 9, 2018 at 10:34 am
Francine,
1) Yes, you do need to make conversion for the individual
nancial statements if they are published. I think you are still
confusing these two items (consolidated vs. individual).
2) Historical.
S.
 Reply
Nick October 22, 2018 at 11:03 am

Hi Sylvia,
Thank you for your information. I would like to ask:
There is a investment in subsidiary. Investment cost keeps as historical cost
in a foreign currency at the date of the transaction.
At the year ended, because of decreasing vale of foreign currency (around
10%). 1) Should I make impairment of the investment using the closing rate?
However, the subsidiary’s retained earning is positive in foreign currency .
2) or the test of impairment of the subsidiary should use the exchange rate
at the date of the transaction ?
Thank you !
Nick
 Reply
Ginger November 2, 2018 at 12:35 pm

Hi, should we do revaluation for the provision for unutilised leave?
 Reply

Cekou December 31, 2018 at 10:35 am

Sylvia, a new position of IFRS conversion manager with 70% pay rise.
I’m a bit confusedClick
abouthere
the following part:
to learn more
For translation of the amounts in foreign currency to your functional
currency, the standard IAS 21 states that you should re-calculate all items
after initial recognition using exchange rate based on characteristics of the
speci c item.
More speci cally:
[…]
For all non-monetary items in foreign currency carried at historical cost –
the historical exchange rate (at the date of transaction);
For all non-monetary items in foreign currency carried at fair value – use the
exchange rate at the date when fair value was determined.
According to my understanding, when we rst acquire a non-monetary item
incurred in a foreign currency (say $) such as PPE, in order to record the
transaction in the books (kept in € functional currency) the cost of the PPE
would instinctively be translated at the rate ruling at the acquisition date.
Therefore it won’t be necessary to re-measure the non-monetary items at
each reporting date since they are already carried at cost less accumulated
depreciation.
Thus, the part of the standard that says: “For all non-monetary items in
foreign currency carried at historical cost – use the historical exchange rate
(at the date of transaction);” looks irrelevant to me.
Hopefully, I made my point clear.
Please advise.
 Reply
Silvia December 31, 2018 at 2:37 pm

No, it is not irrelevant. I simply restates the rules of IAS 21 that
you should keep non-monetary assets at historical cost. But I
added a note that you should not recalculate – I hope it makes 
things clearer.
 Reply
Cekou January 1, 2019 at 7:00 pm

Oh yes Sylvia. Perfectly clear.
Thank you very much.
 Reply
Salome January 7, 2019 at 8:28 am

Dear Silvia,
If i havs prepayment for translation service (translation of document from
one lenguage into other) is this monetary or non-monetary?
 Reply
Salome January 7, 2019 at 8:30 am

Dear Silvia, if i have prepayment for translation service is this monetary or
non-monetary?
 Reply
Krishnaraj January 14, 2019 at 2:30 pm

Hi Silvia,
Thank you for such a wonderful post. I have a clari cation, I am analyzing a
Singapore listed company and it occurred to me that if foreign currency
non-monetary items like PPE is carried at historical cost, then there should
be no foreign currency translation adjustment. But their notes to accounts
says, “For consolidation purpose, the assets and liabilities of foreign
operations are translated into SGD at
the rate of exchange ruling at the end of the reporting period and their pro t

or loss are translated at
After 2 months,the exchange

I landed rates
a new prevailing
position at the
of IFRS date of the
conversion transactions.
manager ” Does
with 70% paythis
rise.
mean that they keep translating the historical cost of a foreign currency
asset in a subsidiary, and when it is consolidated these assets recorded at
historical cost in the foreign currency is translated at year end rate?
Thank you
 Reply

Dear Krishnaraj,
I think there is a bit of confusion. First, you have to think of
WHAT YOU DO. So:
– if you prepare individual, your own nancial statements in
your functional currency (let’s say USD), then you do NOT
revalue non-monetary items.
– if you have a parent in Singapore and you need to translate
your all nancial statements to presentation currency (SGD),
then you revalue ALL assets with the closing rate.
You can read more about it here and here. I hope it helps. S.
 Reply
Kimi January 15, 2019 at 10:57 am

It does! Thank you very much!
 Reply
Waylee C. Chero January 28, 2019 at 1:29 pm

Hi Silvia, On the issue of foreign currency revaluation, is it advisable for a
company to account for exchange gain/loss monthly.
 Reply
Alexander February 20, 2019 at 10:52 am 
After 2 months,Hello Silvia,a new position of IFRS conversion manager with 70% pay rise.
I landed
Non govermental organization has Grant from donor $1.000.000. Functional
currency is Gel. At the end of period it has receivables $800.000, cash
$200.000 and Restricted funds $1.000.000. Exchange rate changed. I have
obligation to Donor to spend all amount if not I should pay back unspent
amount.
Is Restricted funds monetary or non-monetary item?
 Reply
Elly Lim February 25, 2019 at 8:06 pm

Hello Silvia,
If the parent company funding the subs, the functional currency is USD, is
the Intercompany AP/AR will be translated at month end rate instead of
historical rate?
Will this funding to the subs considered as “loans” and treated as “equity”
instead of monetary items?
Thanks,
Elly
 Reply
Silvia February 26, 2019 at 2:11 pm

Please see my response to your second comment.
 Reply
Elly Lim February 25, 2019 at 8:49 pm

Dear Silvia,
I have the same though as: In individual, investment in subsidiary is an
equity investment and thus it is non-monetary. In consolidated, it is di erent
– we need to translate the nancial statements of subsidiary by the closing 
After 2 months,rates.
However, the Partner
Clickfrom
hereour
toaudit
learn rm, he disagreed. He said that the
more
“loan” is considered as equity and it should be translated as “historical rate”.
Do you have any accounting guidance that I can show to him?
Many thanks!
Elly
 Reply
Silvia February 26, 2019 at 2:11 pm

That’s an interesting question. However, I don’t think that the full
loan can be considered as a capital contribution – please see
this article. Intragroup loans must be carefully assessed upon
initial recognition, then you should decide on what it is and then
decide on the accounting treatment.
 Reply
Wisodm March 12, 2019 at 5:34 am

My question is on the day of translation. What are you calling historical
exchange rate which should be used for non monetary assets? For instance,
i have
day1: pruchase of PPE at USD100 when exchange rate is $1: 12ZAR.
day 2: Functional currency change to ZAR – exchange rate $1: 9ZAR
day 3: Year end : exchange rate $1: 11 ZAR
Am i going to translate PPE at $1:9 which is the rate at functional currency
change or i stick to day 1 rate?
I understand at year end (day 3) i wont translate again, but the question is i
should maintain the non monetary assets at which rate?
 Reply
Silvia March 12, 2019 at 5:52 am 
Hi Wisodm,
After 2 months, I landed a new positionif of
youIFRS
change your functional
conversion managercurrency,
with 70%the rate
pay at
rise.
the date of change becomes the new “historical” rate – that
would be 9 ZAR/1 USD. Please read this article to learn more
about it.
 Reply
Wisodm March 12, 2019 at 8:04 am

Thanks Silvia for clari cation
 Reply
sabhan March 27, 2019 at 3:36 pm

Dear Silvia, got a question, in the article the monetary/non-monetary has
been emphasized only on the balance sheet, does it mean that all items in
the Pro t and loss is considered as monetary hence translated at closing.
sabhan
 Reply
Silvia March 27, 2019 at 4:35 pm

Dear Sabhan,
for the purposes of translating transactions into your functional
currency it makes no sense to distinguish monetary/non-
monetary for expenses and revenue, since you never translate
them at closing (the di erent thing is translation to presentation
currency, but here, no monetary/non-monetary distinction is
necessary). S.
 Reply
sabhan March 28, 2019 at 12:38 pm
After 2 months,Dear Silvia,a new position of IFRS conversion manager with 70% pay rise.
I landed
thanks a lot for the response and reply, the article talked about foreign
entity revaluation, could you please clarify where we have speci c foreign
vendors in the parent books( functional currency) should it be valued using
closing
 Reply
Hasan April 25, 2019 at 2:44 pm

Hi Silvia,
Firstly thanks for a helpful website, it is amazing.
My question is about accruals. As you mentioned above “Accruals” are
monetory. In my company sometimes we are posting some accruals due to
the not received or not billed invoices. Example the lawyer is in a trip and
forgot to bill the current months’ invoice. We are posting the monthly
contract lawyer fee to accrual account and expense account. Then after the
month-end closing we are getting an invoice sometimes more than
sometimes less than the accrual. I think that expense was happened when
the service was taken and I did my best estimate for the expense. So I
believe that this accrual must be non-monetary. What do you think about
this subject?
 Reply
zaa April 25, 2019 at 11:26 pm

Hi Silvia
It’s great that you are of so much help to so many,
I had some questions relating to “the acquisitive “case study on the Ifrs
website. Im not sure what to do about issue 3 and was wondering if you’ve
posted anything relating to these case studies or if you could assist me.
This would be truly appreciated.
 Reply 
After 2 months, I landed a new

Silviaposition
April 26,of2019
IFRSatconversion
7:56 am manager with 70% pay rise.
Hi zaa,
thanks! Well, please specify what you are talking about since I
have no idea what is “the issue 3 in the acquisitive case study”.
Thank you!
 Reply
Rohit Singh May 5, 2019 at 8:07 am

Hi Silvia, i am really appreciate to reply to each and every query!!, really
great job you are doing.
I have an some query which i need to understand, if you could please
helping out that would be really appreciated.
Query : 1
My Query is, we have an foreign vendor against which we are receiving the
material in foreign currency (USD) and contract speci ed the rate of
payment 1 USD = 70 INR, in that case at the of book closure if the USD
liability exists in our books and the closing rate of month end is 1 USD = 72
INR OR 1 USD = 69 INR in that case, whether we re-instate the liability by
considering the month end closing rate if reporting currency (INR) or not to
re-instate.
Query: 2
We have an contract where mentioned USD liability suppose $1 Mn for
whole year and the PO would be released for services by converting the
rate 1 USD = 70 INR and one condition mentioned if the rate of for complete
F.Y, is uctuating +2% upward then more than +2% whatever then amount to
be pay to vendor, in that case the nature of this upward would be treated a
foreign exchange gain / loss or consider into the nature for which PO have
released.
e.g. of Query : 2
Contractual liability for Managed Services = $1,000,000.00
FX Rate at the time of issuing of PO 1 USD = INR 70.00
PO issued in INR – 1st Apr’18 = INR 70,000,000.00 
After 2 months,Condition
I landed mentioned if theofrate
a new position IFRSgoing upwardmanager
conversion by 2% in complete
with 70% F.pay
Y. then
rise.in
excess of 2% amount would be pay to vendor.
Closing Rate at the end of F.Y. (31st Mar’19) 1 USD = 73
Rate change is 104%
in Excess of 2% -2%
Rate Fluctuation =INR 1.60
Fresh PO to be issued of INR 1.60 INR 1,600,000.00
– What treatment would be done for extra PO issued in books either
Management Services or Forex gain / loss.
– Whether we required to re-instate the value till the end of F.Y.
Regards,
Rohit Singh
 Reply
Silvia May 5, 2019 at 11:44 am

Dear Rohit,
I am sorry, but these comments serve as a quick help in case of
doubt, but not as a solution to similar more complex scenarios.
We will be very happy to serve you within our online advisory
service here.
 Reply
Muhammad Shazaib May 15, 2019 at 10:47 am

Hi,
In the case of share capital, where the balance is still receivable from a
related party at the time issue of shares. The shares issued were in a
di erent currency.
So the balance of receivable from the related party would be translated at
the SOFP date since there is a right to receive a xed or determinable
number of currency units. RIght?
 Reply

Silviaposition
After 2 months, I landed a new May 15,of2019 atconversion
IFRS 11:41 am manager with 70% pay rise.
Yes, right.
 Reply
addisu June 6, 2019 at 4:02 pm

hi,i have two questions
1. what if a company issued new share and agreed to receive the payment in
a currency di erent from the functional currency but the payment has been
made subsequently on di erent times. how to treat the exchange di erence.
2 what if a company issued new shares at a premium higher than the par
value how do we treat the gains thank u
 Reply
Terry July 17, 2019 at 3:51 am

Hi Silvia, could you clarify if there was a typo in his statement: t”A few
companies treated their foreign currency share capital as a monetary item,
but they took foreign exchange di erences to the statement of other
comprehensive income, …”
Should the foreign currency di erences be taken to equity directly instead
of through OCI?
Thank you.
 Reply

Yes, sure, thank you!
 Reply
Paballo September 14, 2019 at 3:03 pm 

Sylvia, thank
a newyou for thisofarticle.
position IFRS conversion manager with 70% pay rise.
Could you pleaseClick
clarify, are to
here contract
learn assets
more under IFRS 15 classi ed as
monetary items, and if so, why and also, what becomes the reason for
distinguishing between “conditional” – contract asset and unconditional” –
trade receivables if both are monetary
 Reply
Yulia December 3, 2020 at 2:45 pm

Trade receivables are contract assets that became
unconditional. Contract asset is normally expected to be
received in xed or determinable units of currency.
 Reply
Benjamin September 18, 2019 at 3:56 pm

Hi Silvia, thank you for the article.
I have current situation where a branch receives cash in FX from the head
o ce to fund its operations. The head o ce is insisting the amount sent to
the branch even the branch has no means of paying back. Using the
substance over form principle I see the amount transferred from head o ce
as a form equity hence do not agree with revaluation proposed by the head
o ce accounts team. can you help clarify this for me, thank you.
 Reply
Venkat September 20, 2019 at 8:45 am

Thanks for the detail. it is very clear.
 Reply
Suzana October 9, 2019 at 3:09 pm 

Silvia a new position of IFRS conversion manager with 70% pay rise.
I have a current situation ,,,during the year 2017 the company has prepaid
shareholder 1.000.000 E (pre-payment of Divident ) and in March 2018 for
500.000 Euro (prepayment of divident).In 30 june 2018 the Shareholder
settled to recognise the Pro t of the Year 2017 as divident distribution in
Local currency 2.000.000 USD .This “‘prepayments “‘ are monetary -or non
monetary items…should I revaluated them in local currency 2019.I would be
very grateful If you can clarify this situation for me , Thank you in advance
 Reply
Haidari January 1, 2020 at 6:14 am

Dear Sivia,
thanks for your information. could you please provide me details regarding
below two questions.
1) all loans are monetary items, what about loans that are classi ed as
doubtful and loss. can we consider them as monetary, although they are
uncertainty and will be not back.
2) you mentioned in one of the above questions that loan loss reserves are
monetary items. can we consider these loan loss reserve as monetary
liability??
 Reply
Ankit Agarwal February 6, 2020 at 9:08 am

Hey Silvia – Excellent article, though I am willing to understand more on
why Investment in associates is a non-monetary item when the amount is
carried at NAV which indicates determinable amount receivable upon
disinvestment/disposal.
 Reply

Floydka March 9, 2020 at 11:56 am

Silvia, a new position of IFRS conversion manager with 70% pay rise.
Many thnaks for your amazing website. It`s really useful,
Would you be so nice to explain how to treat for month-end valuation
purposes` accrued income and accrued expenses? Are they non-monetary
or monetary items?
Your swift reply will be much appreciated. Thank for help.
 Reply
Silvia March 9, 2020 at 12:58 pm

Hello Floydka, as I wrote above – some of them are monetary,
some of them are non-monetary. But, if they relate to items that
will materialize in cash later on, then they are monetary.
 Reply
Floydka March 9, 2020 at 1:12 pm

Thank you Silvia for your kind assistance. My
understanding now is that it depends mainly on a
probability of bearing these costs by a company (
whether accrued costs are calculated based on a
contract or whether it is a kind of estimation) Best
regards.
 Reply
Sizwe Ntanzi March 27, 2020 at 9:10 am

Is a nancial guarantee a monetary item?
 Reply
Silvia March 27, 2020 at 9:26 am

Yes
 Reply

Renz May 2, 2020 at 1:08 pm
Click
Hi Silvia, can I check here
with youtohow
learn
canmore
I translate the depreciation of xed
asset and right of use assets? Is it using the average exchange rate?
 Reply

In general, use historical rate as for any other items of expenses
and revenues. If you are translating to presentation currency,
you can use average rate as an approximation. S.
 Reply
Gift May 15, 2020 at 9:58 am

Hello Silvia.
Kindly advise on how to deal with depreciation on revalued xed assets
 Reply
Amna Hussain May 19, 2020 at 2:05 pm

Dear Silvia,
My company has an investment of 12% in a foreign based entity. Will this
investment needs to be revalued at closing rate? Or leave as is at historical
rate?
 Reply
Hiren June 27, 2020 at 8:18 pm

Dear Silvia,
In reference to the IFRS, you have mentioned that the Monetary Items
should be translated at the year-end rate of the presentation currency. For
example, I have Bank Accounts in functional currency i.e USD and the 
After 2 months,presentation currency

I landed a new is Tanzanian
position Shillings. Atmanager
of IFRS conversion the year-end, I noticed
with 70% that
pay rise.
the Cash at Bank (USD) into Tanzanian Shillings less to the Actual Balance in
USD hence I need to record gain and increase the bank balance after
translation to year-end rate. Where is this gain recorded in the Pro t or Loss
account as other income or in Other Comprehensive Income (SFP)?
 Reply
Sonjit Roy July 22, 2020 at 9:31 pm

Should unrealized gain or loss reserve account revalued?
In some cases if we not revalued the account, there remains a di erenc.
 Reply
Sharon August 16, 2020 at 9:41 am

Dear Silvia,
Good Day!
My company did accrual revenue in functional currency and billed
customer in foreign currency at later date. As such, there would be
di erences at exchange rate. To o set the accrual revenue caused by the
exchange rate, should it be debit revenue (P/L) or debit unrealized loss?
Thank you so much for your kind advice in advance.
 Reply
Makki September 1, 2020 at 2:53 am

Hi Liz,
We live in a country with hyperin ation rates about 200% a year. So Our
Functional currency is very weak.
We are four partners with 25% each in the company. Since 2016 there has
been numerous partner withdrawals. At the end of the year to zero it out we 
face the challenge with devaluation of the currency. Any way to translate
After 2 months,these partner

I landed withdrawals.
a new position ofAsIFRS
it has no value to
conversion Partner with
manager B compared
70% paytorise.
Partner A at time of withdrawal.
Can this be translated to be fair to all partners. This is a huge issue we are
facing at the moment and nding it not fair for some partners to receive the
same amount at a time with much less value.
Your advice please
 Reply
Silvia September 1, 2020 at 10:27 am

Makki, n. 1 point – I am Silvia, not Liz. N. 2 point – no, it cannot be
translated fair to all the partners if withdrawals happen at the
di erent time points, sorry. If you live in hyperin ationary
economy, then you are taking that risk. The only way is to agree
compensations on a private basis.
 Reply
Zacky September 30, 2020 at 8:30 am

Hi!!, when translating the Balance sheet item, is it reasonable to translate
Liabilities using Closing Selling Rate, Assets using Closing Buying Rates?
please help me with this
 Reply
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
After 2 months,Amos
I landed
Teyea new position
December 24, of IFRS
2020 at conversion
1:11 pm manager with 70% pay rise.
Hello, Click here to learn more
Please I am an auditor and I realised that my client always revalue its

investment in shares (equity investment) using the exchange rate because
the shares were issued in a foreign currency.
Please the gain is added to other income and treated in the pro t or loss.
Please is it right
 Reply
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2/24/2021 Monetary or Non-Monetary?

- CPDbox - Making IFRS Easy

Click here to learn more

Is that item monetary or non-monetary? 

Let’s take a look.

What do the rules say?

More speci cally:

What is monetary and what is non-monetary?

Property, plant and equipment Non-monetary

Intangible assets (including goodwill) Non-monetary

Investments in debt securities Monetary

Net investment in the lease Monetary

Biological assets Non-monetary

Deferred tax asset Monetary – see below

Inventories (including allowances) Non-monetary

Trade receivables (including allowances) Monetary

Other receivables to be settled in cash Monetary

Advances and prepayments It depends – see below

Deposits and bank accounts Monetary

Equity and liabilities

Other components of equity Non-monetary

Deferred tax liability Monetary – see below

Bank and other loans Monetary

Deferred income Non-monetary

Trade payables Monetary

Advances received It depends – see below

Current tax liability Monetary

Advances paid or received

However, I have explained particularly this issue in my article on Accounting for

Investments in preference shares

Share capital in a foreign currency

IAS 12 IAS 21 IAS 39 IFRS 9

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