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Objective
1. An entity may
carry on foreign activities in two ways. It may have
transactions in foreign currencies or it may have foreign
operations. In addition, an entity may present its financial
statements in a foreign currency. The objective of this
Standard is to prescribe how to include foreign currency
transactions and foreign operations in the financial
statements of an entity and how to translate financial
statements into a presentation currency.
2. The principal
issues are which exchange rate(s) to use and how to report the
effects of changes in exchange rates in the financial
statements.
Scope
3. This Standard
shall be applied: (See also SIC-7 Introduction of
the Euro.)
(a) in accounting
for transactions and balances in foreign currencies,
except for those derivative transactions and balances
that are within the scope of IAS 39 Financial Instruments:
Recognition and Measurement;
(b) in translating
the results and financial position of foreign operations
that are included in the financial statements of the
entity
by consolidation, proportionate consolidation or the
equity
method; and
(c) in translating
an entity’s results and financial position into a
presentation
currency.
4. IAS 39 applies to
many foreign currency derivatives and, accordingly, these are
excluded from the scope of this Standard. However, those
foreign currency derivatives that are not within the scope of
IAS 39 (eg some foreign currency derivatives that are embedded
in other contracts) are within the scope of this Standard. In
addition, this Standard applies when an entity translates
amounts relating to derivatives from its functional currency
to its presentation currency.
5. This Standard
does not apply to hedge accounting for foreign currency items,
including the hedging of a net investment in a foreign
operation. IAS 39 applies to hedge accounting.
6. This Standard
applies to the presentation of an entity’s financial
statements in a foreign currency and sets out requirements for
the resulting financial statements to be described as
complying with International Financial Reporting Standards.
For translations of financial information into a foreign
currency that do not meet these requirements, this Standard
specifies information to be disclosed.
7. This Standard
does not apply to the presentation in a cash flow statement of
cash flows arising from transactions in a foreign currency, or
to the translation of cash flows of a foreign operation (see
IAS 7 Cash Flow Statements).
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