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CA Final · Financial Reporting · Ind AS 21 The Effects of Changes in Foreign Exchange Rates

Beta Ltd adopted Ind AS for the first time and, under the Ind AS 101 exemption in paragraph D13AA, chose to continue its previous GAAP policy for exchange differences on long-term foreign currency monetary items. How does Ind AS 21 treat these items?

Paragraph 7AA of Ind AS 21 scopes out long-term foreign currency monetary items for which the entity opted for the Ind AS 101 D13AA exemption. The entity therefore continues its previous GAAP policy for exchange differences on those items instead of applying Ind AS 21.

  1. AThey are scoped out of Ind AS 21 by paragraph 7AA, so the previous GAAP policy continues for themCorrect
  2. BThey must be restated with all exchange differences taken to profit or loss
  3. CThey must be carried at the historical rate with no translation
  4. DThey are covered by Ind AS 21 but only for disclosure purposes

Explanation

Paragraph 7AA was inserted to scope out long-term foreign currency monetary items for which the entity opted for the Ind AS 101 D13AA exemption. Exchange differences on those items continue under the previous GAAP policy. Restating them through profit or loss would ignore the scope-out.

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