International Accounting Standard 21
The International Accounting Standard 21 ( IAS 21 ) is an accounting regulation of the IASB .
As a regulation of the IASB, IAS 21 regulates the effects of changes in exchange rates on the balance sheet . So it concerns companies with assets or liabilities in foreign currency . Now at the balance sheet date, one is conversion required.
There are two options for treatment:
- Use of the historical exchange rate at the time of purchase (purchase price)
- Use of the exchange rate on the balance sheet date (closing rate)
IAS 21 differentiates between monetary items that are converted on the reporting date and non-monetary items that are valued at amortized cost in accordance with the historical acquisition rate. Monetary items include all items that contain a right to receive (for assets) or an obligation to pay (for liabilities) a fixed or determinable number of currency units. Pension obligations are considered to be monetary items. Acquired equity instruments, on the other hand, are non-monetary items, since the dividends do not result from claims under the law of obligations and their amount cannot be determined.
