Initial recognition

Learning objectives

• Record a foreign currency transaction on initial recognition in the functional currency.L1, L2
• Calculate, from the case data, the translated amount or the exchange difference relating to the concept “Initial recognition in functional currency (21)”.L1, L2

Normative references

• IAS 21 §21Initial recognition of a foreign currency transaction: the spot exchange rate between the functional currency and the foreign currency at the date of the transaction is applied.

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

3 questions

• A foreign currency transaction is initially recorded at the closing rate of the period, whatever the date of the transaction.L1
• Aldric, whose functional currency is the euro, buys goods invoiced at {foreign_amount}. The spot rate at the date of the transaction is 0.92 euro per 1 dollar. Calculate the amount to record in euros.L1
• Dorian, whose functional currency is the euro, receives goods invoiced at {foreign_amount} by an American supplier. The spot rate at the date of the transaction is 0.92 euro per 1 dollar, i.e. {functional_amount}. Post the initial recognition entry.L2