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Intragroup monetary balances
Learning objectives
- Analyse the treatment of exchange differences on intragroup monetary balances on consolidation.L3, L4
Normative references
- IAS 21 §44Paras. 45 to 47, in addition to paras. 38 to 43, apply when the results and financial position of a foreign operation are translated into a presentation currency so that the foreign operation can be included by consolidation or the equity method (cross-reference extended to para. 47A by the November 2025 amendment, future requirement).
- IAS 21 §45The incorporation of a foreign operation follows normal consolidation procedures (elimination of intragroup balances and transactions of a subsidiary, IFRS 10); however, an intragroup monetary asset or liability, whether short-term or long-term, cannot be eliminated without showing the results of currency fluctuations, because it exposes the entity to a gain or loss through currency fluctuations: the exchange difference is recognised in consolidated profit or loss or, in the circumstances described in para. 32, in other comprehensive income and accumulated in equity until disposal of the foreign operation.
- IAS 21 §46Foreign operation whose financial statements are prepared as of a date different from that of the reporting entity: when no additional statements are prepared as of the same date, IFRS 10 permits a difference of no more than three months, with adjustments for significant transactions or events; the assets and liabilities of the foreign operation are then translated at the exchange rate at the end of the reporting period of the foreign operation, with adjustments for significant changes in exchange rates up to the end of the reporting period of the reporting entity; the same approach applies to the equity method for associates and joint ventures (IAS 28).
Original summaries of the paragraphs (reference register), never a quotation of the standard.