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

Kaveri Power Ltd has long-term foreign currency monetary items. On first-time adoption of Ind AS, it opted for the exemption in paragraph D13AA of Appendix D to Ind AS 101 and continues its previous GAAP policy for exchange differences on these items. How does Ind AS 21 treat these items?

They are scoped out of Ind AS 21 under paragraph 7AA. Because the entity opted for the Ind AS 101 paragraph D13AA exemption, it continues its previous GAAP accounting for exchange differences on those long-term foreign currency monetary items instead of applying Ind AS 21.

  1. AThey are brought within Ind AS 21 and all exchange differences go to profit or loss immediately
  2. BThey are scoped out of Ind AS 21 by paragraph 7AACorrect
  3. CThey must be restated at historical rates and no exchange difference is recognised ever
  4. DThey are treated as net investment in a foreign operation

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 Ind AS 101 D13AA exemption. Hence the previous GAAP policy continues for them. Immediate profit or loss recognition under Ind AS 21 therefore does not apply to these items.

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