IAS 21 Foreign Currency Exchange Transaction | IFRS Lectures | ACCA Exam | International Accounting

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An entity may carry on foreign activities in two ways. It may have transactions in foreign currencies or it may have foreign operations. IAS 21 prescribes how an entity should:
account for foreign currency transactions;
translate financial statements of a foreign operation into the entity’s functional currency; and
translate the entity’s financial statements into a presentation currency, if different from the entity’s functional currency.
IAS 21 permits an entity to present its financial statements in any currency (or currencies).
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.
An entity’s functional currency is the currency of the primary economic environment in which the entity operates (ie the environment in which it primarily generates and expends cash). Any other currency is a foreign currency.
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[@MoinulHossain-rw2ry]

So much concise explanation and suitable for everyone. The fact that you start with the absolute basics and build upon that step by step is really commendable. Your work has been a gift to students of accounting.

[@mkizito5088]

Hallo Sir. What about having unrealized gain/loss as an equity account instead of expense account?

[@habilbhagat7505]

Hi Sir if both are having a same currency dealings and bank accts then they will receive fcy in the fcy bank accounts. So we will receive and pay from the same account, then EX fluctuations effect is no longer there to the extent of Revenue and Cost, but only to the extent on GM derived which If I sell to bank if required. Secondly we are translating all our fcy bank accounts on monthly basis for MIS reporting and on yearly basis too. We also do Dr's, Crs year end entry for fcy transactions through a control account and take the ex gain or loss for the year end. I don't want to take transaction date for all receipts and payments on day to day basis

[@nihadmejed1660]

say mashallah on this amazing explanation

[@AccountingLectures]

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[@nandan5942]

Thank You sir

[@AccountingLectures]

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[@davidduncan1567]

Hi Sir. Assuming I have a foreign currency payable as at close of year 2022. At 2022 year I have found the difference between the spot rate and the closing rate and have recognised my unrealised exchange loss or gain. This loan still remains at 2023 year end. At year end I have used the closing rate to convert the loan to my presentation currency, will the exchange difference be between the opening balance of the loan and closing balance or rather I should take the spot rate I took the loan at in 2022 and then the closing rate of 2023 to convert the loan amount and then the difference between that and what is is in the books as the loan amount in 2023 is what becomes exchange loss? I would be grateful if you could clarify this for me.

[@accountingwithme6726]

ما شاء الله عليك

[@AccountingLectures]

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[@KM-rk5jv]

Sir do we need to revalue customer advance received at balance sheet date??