Exchange differences on the net investment

Learning objectives

• Recognise in other comprehensive income, in the consolidated financial statements, the exchange differences on the net investment.L3, L4

Normative references

• IAS 21 §32Exchange differences on a monetary item that forms part of the net investment in a foreign operation are recognised in profit or loss in the separate financial statements of the reporting entity or the individual financial statements of the foreign operation, and in other comprehensive income in the financial statements that include the foreign operation and the reporting entity (for example, consolidated financial statements); they are reclassified to profit or loss on disposal of the net investment.
• IAS 21 §33Monetary item forming part of the net investment: when denominated in the functional currency of the reporting entity, the exchange difference arises in the individual financial statements of the foreign operation; when denominated in the functional currency of the foreign operation, it arises in the entity's separate financial statements; when denominated in another currency, it arises in both (para. 28 in each case). In the financial statements that include the foreign operation by consolidation or the equity method, these exchange differences are recognised in other comprehensive income. Wording resulting from the December 2005 amendment (para. 58A).

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

1 question

• The loan from the parent Orsane to its foreign subsidiary is part of the net investment. In the parent's separate statements, it produced an exchange gain of {exchange_difference} recognised in profit or loss. Post the corresponding consolidation entry.L3