Monetary and non-monetary items

Learning objectives

• Distinguish monetary from non-monetary items by reference to the right to receive (or obligation to deliver) a fixed or determinable number of units of currency.L1, L2, L3

Normative references

• IAS 21 §16Monetary item: its essential feature is a right to receive (or an obligation to deliver) a fixed or determinable number of units of currency; examples: pensions and other employee benefits to be paid in cash, provisions to be settled in cash, lease liabilities, cash dividends recognised as a liability; a contract to receive (or deliver) a variable number of the entity's own equity instruments or of assets whose fair value equals a fixed or determinable number of units of currency is also a monetary item. Non-monetary item: absence of such a right or obligation; examples: amounts prepaid for goods and services, goodwill, intangible assets, inventories, property, plant and equipment, right-of-use assets, provisions to be settled by the delivery of a non-monetary asset.

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

2 questions

• Tarvin paid a foreign supplier an advance of 20,000 dollars for the delivery of a machine. Its accountant writes: "This advance is a monetary item, so it will be translated at the closing rate." What is the error?L2
• The Halvor group holds: a lease liability in dollars (rent owed), a cash-settled provision in dollars, an advance paid in dollars for a machine, and a contract to deliver a variable number of its own shares with a fair value equal to 100,000 dollars. Classify each item as monetary or non-monetary and justify your approach, separating case facts, rule and judgement.L3