Foreign operation

Learning objectives

• Identify a foreign operation (subsidiary, associate, joint arrangement or branch) by reference to its functional currency or its location.L1, L2

Normative references

• IAS 21 §8Terms defined in para. 8: closing rate (the spot exchange rate at the end of the reporting period); exchangeable currency (the entity is able to obtain the other currency within a time frame that allows for a normal administrative delay and through a market or exchange mechanism in which an exchange transaction would create enforceable rights and obligations); exchange difference (the difference resulting from translating a given number of units of one currency into another currency at different exchange rates); exchange rate (the ratio of exchange for two currencies); fair value (reference to IFRS 13); foreign currency (a currency other than the functional currency); foreign operation (a subsidiary, associate, joint arrangement or branch whose activities are based or conducted in a country or currency other than those of the reporting entity); functional currency (the currency of the primary economic environment in which the entity operates); group; monetary items (units of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units of currency); net investment in a foreign operation (the reporting entity's interest in the net assets of that operation); presentation currency; spot exchange rate (the exchange rate for immediate delivery).

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

2 questions

• Which entity meets the definition of a foreign operation?L1
• Brenne, established in France and presenting its accounts in euros, holds a subsidiary also located in France, but whose activities are conducted in dollars with American customers. Is this subsidiary a foreign operation?L2