Differences on monetary items in profit or loss

Learning objectives

• Recognise in profit or loss exchange differences arising on the settlement or translation of monetary items.L1, L2
• Calculate, from the case data, the translated amount or the exchange difference relating to the concept “Exchange differences on monetary items in profit or loss (27-28)”.L1, L2

Normative references

• IAS 21 §28Exchange differences arising on the settlement of monetary items or on translating them at rates different from those at which they were translated on initial recognition or in previous financial statements: recognised in profit or loss in the period in which they arise, except as described in para. 32 (net investment).
• IAS 21 §29A monetary item arising from a foreign currency transaction gives rise to an exchange difference when the exchange rate changes between the transaction date and the settlement date: when settled within the same period, the whole difference is recognised in that period; when settled in a subsequent period, the difference recognised in each period up to settlement is determined by the change in exchange rates during that period.

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

3 questions

• The exchange difference on a trade payable denominated in a foreign currency is taken directly to equity.L1
• Varennes settles a payable of {foreign_amount}, recorded at {carrying_amount}. The spot rate at the settlement date is 0.97 euro per 1 dollar. Calculate the cash paid in euros and the exchange loss to recognise in profit or loss.L2
• Ardent settles a payable of {foreign_amount}, recorded at {carrying_amount}. At the spot rate of 0.95 euro per 1 dollar at the settlement date, the cash paid is {settlement_amount}. Post the settlement entry.L2