Prospective application

Learning objectives

• Explain that a change in functional currency is applied prospectively.L2, L3

Normative references

• IAS 21 §35When there is a change in functional currency, the entity applies the translation procedures applicable to the new functional currency prospectively from the date of the change.
• IAS 21 §37The effect of a change in functional currency is accounted for prospectively: all items are translated into the new functional currency using the exchange rate at the date of the change; the resulting translated amounts for non-monetary items are treated as their historical cost; exchange differences arising from the translation of a foreign operation previously recognised in other comprehensive income (paras. 32 and 39(c)) are not reclassified to profit or loss until the disposal of the operation.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

1 question

• When the functional currency changes, the entity restates the comparative periods as if the new currency had always been its functional currency.L2