IAS 21 Explained_ Foreign Exchange Rates

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00:00IS-21 aims to prescribe how to include foreign currency transactions and foreign operations

00:06in the financial statements of an entity and how to translate financial statements into

00:11a presentation currency, the standard addresses which exchange rates to use, and how to report

00:17the effects of changes in exchange rates in the financial statements.

00:22IS-21 applies to accounting for transactions and balances in foreign currencies, translating

00:28the results and financial position of foreign operations, and translating an entity's results

00:34and financial position into a presentation currency.

00:37Definitions include terms like closing rate, exchange difference, exchange rate, foreign

00:43currency, functional currency, monetary items, net investment in a foreign operation, and

00:49more.

00:50The approach required by IS-21 involves reporting foreign currency transactions in the functional

00:56currency, recognizing exchange differences, and translating to the presentation currency

01:02using specific procedures.