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CMA Final · Corporate Financial Reporting · The Effects of Changes in Foreign Exchange Rates (Ind AS 21)

An entity adopting Ind AS for the first time had, under previous GAAP, a policy for exchange differences on long-term foreign currency monetary items recognised before its first Ind AS reporting period. It opts for the exemption in paragraph D13AA of Appendix D to Ind AS 101. Which statement about the scope of Ind AS 21 is correct for these items?

Paragraph 7AA of Ind AS 21 scopes out long-term foreign currency monetary items for which the entity has chosen the exemption in paragraph D13AA of Ind AS 101. Such an entity may continue its previous GAAP policy for exchange differences on those items.

  1. AParagraph 7AA scopes these items out of Ind AS 21, allowing continuation of the previous GAAP policyCorrect
  2. BInd AS 21 applies fully to them, ignoring the exemption
  3. CThey are scoped out of all Ind AS including Ind AS 101
  4. DThey must be translated at the average rate for the year under Ind AS 21

Explanation

Ind AS 21 inserted paragraph 7AA to scope out long-term foreign currency monetary items for which the entity opted for the D13AA exemption of Ind AS 101, so the earlier policy for exchange differences continues. Option B contradicts this.

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