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WorkpaperIAS 21 — The Effects of Changes in Foreign Exchange RatesL1 · L2 · L3 · L4

Functional currency file: indicators, documented judgement, change and disclosures

2 missions8 sections to document45 min
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Status
Published

Objective of the workpaper

Describe the entity's facts (selling prices, costs, financing, receipts), enter the indicators observed in the grid, review them starting with the primary indicators, justify the conclusion (professional judgement, no threshold imposed), then prepare the disclosures. If the functional currency changes, translate the amounts at the rate of the date of the change.

8 sections · 16 blocks · 1 calculation · 0 entries

  • IAS 21 §8
  • IAS 21 §9
  • IAS 21 §10
  • IAS 21 §11
  • IAS 21 §12
  • IAS 21 §13
  • IAS 21 §17
  • IAS 21 §35
  • IAS 21 §36
  • IAS 21 §37
  • IAS 21 §53
  • IAS 21 §54

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

2 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity
Purchase in dollars: functional currency, recognition at the spot rate, remeasurement of the payable at closing and settlement
Case tasks documented here
  • What is the entity's functional currency, and is the dollar payable a monetary item?
  • Translate the purchase at the spot rate of 15 November 20X5.
1

Facts and data

Inputs

  • Entity facts: selling prices, costs, financing, receipts

    Text

    PRIX_COUTS_FINANCEMENT_ENCAISSEMENTS_EN_EUR

  • Grid of the indicators observed

    Table

  • Presentation currency retained

    Text

    EUR

  • Reference amount in foreign currency

    Number

    50,000

  • Rate of the reference date (per 100 units of foreign currency: a rate of 0.92 is entered as 92)

    Number

    92 %

  • Date of the change of functional currency (if any)

    Date

2

Supporting evidence

Evidence

  • Evidence obtained and referenced (category, document reference)

    EvidenceRequired

3

Analysis of the indicators

Analysis

IAS 21 §8IAS 21 §9IAS 21 §10IAS 21 §11IAS 21 §12IAS 21 §13IAS 21 §17IAS 21 §35IAS 21 §36IAS 21 §37

  • Points reviewed: functional currency indicators

    ChecklistRequired

    • Currency that mainly influences selling prices (and country of competition and regulation)
    • Currency that mainly influences costs
    • Currency in which financing is raised
    • Currency in which operating receipts are retained
    • Foreign operation: extension of the entity or significant autonomy
    • Foreign operation: share of transactions with the reporting entity
    • Foreign operation: effect of its cash flows on the entity's and servicing of its debt
    • Primary indicators examined first, without stopping there when the picture is mixed
    • A change of functional currency requires a change in the underlying conditions
    • Change applied prospectively; items translated at the rate of the date of the change
4

Translation at the reference date

Calculations

IAS 21 §35IAS 21 §36IAS 21 §37

  • Amount translated at the rate of the reference date (date of the change or control transaction)

    CalculationRequired

    46,000

    Reference amount in foreign currency ; Rate of the reference date (per 100 units of foreign currency: a rate of 0.92 is entered as 92)

5

Judgement on the functional currency

Judgment

IAS 21 §9IAS 21 §10IAS 21 §11IAS 21 §12IAS 21 §17

  • Reading of the indicators

    JudgmentRequired

    The primary indicators converge on one currency

    The primary indicators converge on one currency / Mixed indicators: management judgement

    Professional judgement: when the indicators are mixed, management retains the currency that most faithfully represents the economic effects of the underlying transactions, giving priority to the primary indicators; no numerical threshold is imposed.

  • Rationale: facts relied on, analysis, alternative rejected

    Text

    INDICATEURS_PRIMAIRES_EN_EUR

  • Functional currency retained

    Text

    EUR

6

Disclosures

Disclosure

IAS 21 §53IAS 21 §54

  • Points to complete

    ChecklistRequired

    • Fact that the presentation currency differs from the functional currency
    • Functional currency stated
    • Reason for using a different presentation currency
    • Change of functional currency: fact and reason

  • Draft note on the functional currency

    Text

7

Conclusion

Conclusion

  • Facts, reasoned judgement, currency retained and disclosures submitted to the reviewer

    ConclusionRequired

8

Normative references

References

  • Paragraphs cited in this workpaper and their verification status

    References

9

Checks and financial statement impact

  • Judgement documentedPass
  • Rationale writtenPass
Assets
0
Liabilities
0
Profit or loss
0
OCI
0
Equity
0