Income and expenses at transaction rates

Learning objectives

• Translate income and expenses at the exchange rates at the dates of the transactions (or at an approximating average rate).L1, L2, L3
• Calculate, from the case data, the translated amount or the exchange difference relating to the concept “Income and expenses at transaction-date rates (39(b))”.L1, L2, L3

Normative references

• IAS 21 §39Translation into a different presentation currency. Current requirement (EU text in force, before the November 2025 amendment): applies to any entity whose functional currency is not the currency of a hyperinflationary economy: (a) assets and liabilities for each statement of financial position presented (including comparatives) at the closing rate at the date of that statement; (b) income and expenses for each statement presenting profit or loss and other comprehensive income (including comparatives) at the exchange rates at the dates of the transactions; (c) the resulting exchange differences in other comprehensive income. Future requirement (November 2025 amendment, para. 60O; annual periods beginning on or after 1 January 2027, earlier application permitted): the introductory sentence covers cases where the functional and presentation currencies differ and are both currencies of non-hyperinflationary economies, translation into a hyperinflationary presentation currency being dealt with by added paragraphs.

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

3 questions

• When translating into the presentation currency, income and expenses of each statement of profit or loss are translated at the rates at the dates of the transactions.L1
• The Lambert group's accountant translates the British subsidiary's profit of 100,000 pounds at the closing rate of 1.18 euros, i.e. 118,000 euros, writing: "Profit is translated like assets and liabilities." What is the error?L2
• The British subsidiary of Cordel earns income of {revenue_h1} in the first half and {revenue_h2} in the second, and incurs expenses of {expenses_h1} then {expenses_h2}. Case convention: the half-year rates, 1.10 euros then 1.16 euros per 1 pound, approximate the rates at the dates of the transactions. Calculate income, expenses and profit translated into euros.L3