Non-monetary items at historical cost

Learning objectives

• Keep non-monetary items measured at historical cost at the exchange rate at the date of the transaction.L1, L2
• Calculate, from the case data, the translated amount or the exchange difference relating to the concept “Non-monetary at historical cost, transaction-date rate (23(b))”.L1, L2

Normative references

• IAS 21 §23At the end of each subsequent reporting period: foreign currency monetary items at the closing rate; non-monetary items measured at historical cost at the exchange rate at the date of the transaction; non-monetary items measured at fair value at the exchange rate at the date when the fair value was measured.
• IAS 21 §34An entity that keeps its books and records in a currency other than its functional currency translates all amounts into its functional currency in accordance with paras. 20 to 26 when it prepares its financial statements, so as to produce the same amounts as if the items had been recorded initially in the functional currency (monetary items at the closing rate, non-monetary items measured at historical cost at the exchange rate of the original transaction).

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

3 questions

• Halden buys a machine for 45,000 dollars at the rate of 0.88 euro, i.e. 39,600 euros. At the closing date the rate is 0.93 euro; its accountant translates the machine at 41,850 euros and recognises a gain of 2,250 euros. What is the error?L1
• Lenoir buys equipment for {foreign_amount} at the spot rate of 0.90 euro per 1 dollar. The closing rate is then 0.94 euro. The equipment is measured at cost (case convention: depreciation ignored). Calculate its carrying amount in euros at the closing date and the exchange difference to recognise.L2
• Perrot pays cash for a machine of {foreign_amount} at the spot rate of 0.88 euro per 1 dollar, i.e. {functional_amount}. Post the acquisition entry, the machine being subsequently measured at cost.L2