Presentation by CA Varun Sethi: Explains through flowboxes - IndAS 21/ IAS 21 - The effects of changes in foreign exchange rates - especially 1. Accounting for Foreign Currency transactions and 2. Accounting for ‘Exchange differences’ on Foreign Currency transactions 3. Foreign currency translations for consolidation procedures (translation of account balances into reporting / presentation currency)

1. 20151 Presentation by: CA Varun Sethi Private
• Factors for consideration
in determination of
functional currency.
• Initial and subsequent
recognition, measurement
of FCT &
• A/c for Exchange
Differences
IndAS 21: Scope
The Effects of Changes in Foreign Exchange Rates
CA Varun
Sethi
09899766487
Determination of
functional currency
Foreign Currency
Translation
(CFS/SFS)
1 3
Foreign Currency
transactions (FCT)
(Re)Measurement
2
Para 9 - 14 Para 38– 50Para 20 – 37 & 50
• A/c for translation of
financial statements for
presentation in
presentation currency
other than functional
currency.

2. 20152 Presentation by: CA Varun Sethi Private
1. In Functional currency
2. At Spot /Average
Exchange Rate
3. As on transaction date
IndAS 21: Para 20 - 26
Accounting for ‘Foreign Currency transactions’
CA Varun
Sethi
09899766487
Initial Recognition
Subsequent Recognition
(Each reporting date)
1 2
Foreign currency Non-monetary items
Historical Cost
Foreign
currency
monetary items
Fair value
NMI Measured at
1. In Functional
currency
2. At Closing
Exchange Rate
1. In Functional
currency
2. At transaction
date exchange
Rate
1. In Functional
currency
2. At FV
determination
date exchange
Rate

3. 20153 Presentation by: CA Varun Sethi Private
ED Recognized initially in OCI ED Recognized in Income Statement in the
period in which they arise
IndAS 21: Para 27 - 31
Accounting for ‘Exchange differences’ on Foreign Currency transactions
CA Varun
Sethi
09899766487
Exchange differences (ED)* on
MONETARY ITEMS
Exchange differences (ED) on
NON MONETARY ITEMS (NMI)
1 2
Hedging
Instruments (HI)
Gain or Loss on
NMI recognized
in OCI
Other than HI
Gain or Loss on
NMI recognized
in PL
*EXCLUDING Exchange differences arising from translation of long-term foreign currency monetary items recognized in the
financial statements as of First Time adoption of IndAS

4. 20154 Presentation by: CA Varun Sethi Private
ED Recognized in Income
Statement/ Profit and Loss.
ED Recognized
in OCI initially
IndAS 21: Para 32 – 34, 48 - 49
The Effects of Changes in Foreign Exchange Rates
CA Varun
Sethi
09899766487
Exchange differences (ED) on MONETARY ITEMS
forming part of a reporting entity’s ‘net investment in a foreign operation’
(for which settlement is neither planned nor likely to occur in the foreseeable future)
SFS of
Parent
On *Partial/ Full
Disposal* of
foreign operation
SFS of
Foreign
operation
Before any
Disposal of
foreign operation
• *Disposal = Resulting in loss of control
• SFS = Separate Financial Statements
• CFS = Consolidated Financial Statements
CFS
On Partial Disposal
NOT resulting in
loss of control of
foreign operation
Re-attribute the
proportionate
share to NCI
Reclassify
parent’s share of
ED from OCI to
profit or loss.