Foreign currency cash flows and the effect of exchange rate changes

Foreign currency cash flows are translated into the functional currency at the rate at the date of the cash flow; those of a foreign subsidiary at the rates at the dates of the cash flows, an average rate possibly approximating them, never the closing rate. Unrealised exchange differences are not cash flows; the effect of exchange rates on cash held in foreign currency is presented on a separate line to reconcile opening and closing cash.

In this lesson

1. 2Understand
2. 3The IFRS rule
3. 4Why?
4. 5How to apply it
5. 6Numerical example
6. 7Key points
7. 8Exercises