ACCT2006 Chapter Notes - Chapter 23: Spot Contract, Australian Dollar, Financial Statement
Document Summary
The main issue in accounting for foreign currency transactions is what to do with any foreign exchanges differences that arise when assets or liabilities are remeasured at the end of the reporting period using the closing exchange rate. The approach in aasb 121/ias 21 is that exchanges differences on the remeasurement of all monetary assets and liabilities are immediately recognised i profit or loss except for certain hedging relationships. The functional currency is the currency of the primary economic environment in which the company operates. The primary economic environment is the one in which the company primarily generates ad expends cash. In determining the functional currency of an australian company, aasb 121/ias 21 gives the following three indicators: The currency that mainly affects the sales prices for its goods and services, which is usually the currency in which the sales prices are denominated and settled.
