Consolidating balance sheet foreign currency

12-Feb-2017 17:14 by 10 Comments

Consolidating balance sheet foreign currency

The relevant dates and exchange rates are as follows: What’s your own accounting practice related to deposits, prepayments or advances in foreign currencies? Please, let me know in a comment below the article and if you know someone who can use this information, please share – thank you!Update 05 February 2015: There was a great discussion on Linked In in relation to this topic.

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In most cases, no financial liability related to firm commitments is recognized until the goods are delivered (or shipped, depending on Incoterms), and the risks and rewards of ownership have passed. Your statement of financial position will show the prepayment at the historical rate, that is in amount of EUR 22 403.

On 11 February 20X1, recognition criteria for recognizing a machine in IAS 16 are still NOT met. At this point, you cannot control the machine and as a result, “the future economic benefits flowing to the entity” are not probable. This is exactly the date when you gain control over the machine.

When it comes to more complicated transactions, then it’s hard to apply the rules.

Often, I receive one and the same question: “Dear Silvia, we entered a contract for production and delivery of a machine specific to our business and we paid the first down-payment in a foreign currency. And let me illustrate 2 different scenarios in the examples.

We are all aware of basic rules with regard to selection of appropriate exchange rate to apply.

If you would like to refresh a bit, you can sneak in my lesson from the IFRS In 1 Day dedicated to foreign currencies here.Therefore, you do not recalculate anything and your entry is: Now you may argue – but, the date when a machine appears in your financial statements is on delivery, so we should recalculate the full amount of USD 100 000 with the rate applicable on delivery.Some companies apply this treatment, but it’s not really correct and presenting true and fair view of the transaction.I answered several questions around, as this is very confusing topic and lots of us have some doubts around. A guide to accounting for users who are interested in understanding accounting reports.Standard IAS 21 The Effects of Changes in Foreign Exchange Rates prescribes how to convert amounts to another currency in 2 cases: Although this sounds quite straightforward, some difficulties may arise in determining the transaction date.

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