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

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

Such long-term foreign currency monetary items are scoped out of Ind AS 21 by paragraph 7AA, because the entity opted for the Ind AS 101 exemption in paragraph D13AA. The previous GAAP policy for exchange differences therefore continues for those items.

  1. AThey are scoped out of Ind AS 21 through an inserted paragraph 7AACorrect
  2. BThey must be retrospectively restated under Ind AS 21 recognising all differences in profit or loss
  3. CThey are translated at the average rate for the year under Ind AS 21
  4. DThey are treated as non-monetary items carried at historical rate

Explanation

Paragraph 7AA was inserted in Ind AS 21 to scope out long-term foreign currency monetary items for which the entity has opted for the exemption in paragraph D13AA of Appendix D to Ind AS 101. Hence Ind AS 21 recognition rules do not apply to those items; the previous GAAP policy continues. Restating them under Ind AS 21 would defeat the exemption.

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