IAS 21 Explained_ Foreign Exchange Rates
Transcript
00:00IS-21 aims to prescribe how to include foreign currency transactions and foreign operations
00:06in the financial statements of an entity and how to translate financial statements into
00:11a presentation currency, the standard addresses which exchange rates to use, and how to report
00:17the effects of changes in exchange rates in the financial statements.
00:22IS-21 applies to accounting for transactions and balances in foreign currencies, translating
00:28the results and financial position of foreign operations, and translating an entity's results
00:34and financial position into a presentation currency.
00:37Definitions include terms like closing rate, exchange difference, exchange rate, foreign
00:43currency, functional currency, monetary items, net investment in a foreign operation, and
00:49more.
00:50The approach required by IS-21 involves reporting foreign currency transactions in the functional
00:56currency, recognizing exchange differences, and translating to the presentation currency
01:02using specific procedures.