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

Himalaya Pharma Ltd adopted Ind AS for the first time and, under Ind AS 101, chose the exemption allowing it to continue its previous GAAP policy for exchange differences on long-term foreign currency monetary items recognised before the start of its first Ind AS reporting period. How does Ind AS 21 treat these items?

Such long-term foreign currency monetary items are scoped out of Ind AS 21 by paragraph 7AA, but only where the entity opted for the exemption in paragraph D13AA of Appendix D to Ind AS 101 to continue its previous GAAP policy. It is not a general exclusion.

  1. AThey are within Ind AS 21 and all exchange differences must go to profit or loss
  2. BThey are scoped out of Ind AS 21 by paragraph 7AA, to the extent the exemption in paragraph D13AA of Appendix D to Ind AS 101 is usedCorrect
  3. CThey must be remeasured at the average rate of the year under Ind AS 21
  4. DThey are scoped out of Ind AS 21 permanently for all long-term monetary items of any entity

Explanation

Paragraph 7AA was inserted in Ind AS 21 to scope out long-term foreign currency monetary items for which the entity opted for the exemption in paragraph D13AA of Appendix D to Ind AS 101. The scope-out applies only to such items and entities, not to all long-term items. Hence the claim of a blanket exclusion is wrong.

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