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Commission Regulation (EC) No 1725/2003 of 29 September
2003 adopting certain international accounting standards
in accordance with Regulation (EC) No 1606/2002 of the
European Parliament and of the Council.
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This SIC contains
amendments resulting from the adoption of Commission
Regulation (EC) No. 2238/2004 of 29 December 2004.
Introduction of the euro
Paragraph 11 of IAS 1 (revised
2004), presentation of
financial statements, requires that financial statements
should not be described as complying with International
Accounting Standards unless they comply with all the
requirements of each applicable standard and each applicable
interpretation issued by the Standing Interpretations
Committee. SIC interpretations are not intended to apply to
immaterial items.
Reference: IAS 21, the effects of changes in foreign
exchange rates.
Issue
1. From 1 January 1999, the effective start of economic and
monetary union (EMU), the euro will become a currency in its
own right and the conversion rates between the euro and the
participating national currencies will be irrevocably fixed,
i.e. the risk of subsequent exchange differences related to
these currencies is eliminated from this date on.
2. The issue is the application of IAS 21 to the changeover
from the national currencies of participating Member States of
the European Union to the euro ("the changeover").
Consensus
3. The requirements of IAS 21 regarding the translation of
foreign currency transactions and financial statements of
foreign operations should be strictly applied to the
changeover. The same rationale applies to the fixing of
exchange rates when countries join EMU at later stages.
4. This means that,
in particular:
(a) foreign currency
monetary assets and liabilities resulting from transactions
shall continue to be translated into the functional currency
at the closing rate. Any resultant exchange differences shall
be recognised as income or expense immediately, except that an
entity shall continue to apply its existing accounting policy
for exchange gains and losses related to hedges of the
currency risk of a forecast transaction.
(b) cumulative
exchange differences relating to the translation of financial
statements of foreign operations shall continue to be
classified as equity and shall be recognised as income or
expense only on the disposal of the net investment in the
foreign operation.
(c) exchange differences resulting from the translation of
liabilities denominated in participating currencies should not
be included in the carrying amount of related assets.
Date of consensus: October 1997.
Effective Date:
This
Interpretation becomes effective on 1 June 1998. Changes in
accounting policies shall be accounted for according to the
requirements of IAS 8.
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