CERTYNEX IFRS ACADEMY

Galmira's Turkish subsidiary collects 80% of its receipts in the last month of the year, a period of sharp depreciation of the Turkish lira (case data). The consolidation team proposes a simple annual average rate. Which position should be taken?

Accept the annual average rate, since an average for the period may be used whatever the timing of the flows.

Use the closing rate for all flows, more prudent in a context of sharp depreciation of the currency.

Reject the simple average, which does not approximate actual rates; use rates close to the flow dates (e.g. monthly weighted average).

Use the opening rate, known from the start of the year and therefore easier to document for the auditors.