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

Paragraph 7AA of Ind AS 21 was inserted for which purpose, as per the comparison with IAS 21?

Paragraph 7AA scopes out long-term foreign currency monetary items for which the entity chose the Ind AS 101 paragraph D13AA exemption. The entity keeps its previous GAAP policy for exchange differences on those items, so Ind AS 21 does not apply to them.

  1. ATo scope out long-term foreign currency monetary items for which the entity opted for the Ind AS 101 paragraph D13AA exemption, continuing the previous GAAP policyCorrect
  2. BTo require all long-term foreign currency loans to be translated at the average rate
  3. CTo exempt hyperinflationary economies from translation requirements
  4. DTo allow capitalisation of all exchange differences on every foreign currency loan

Explanation

Appendix 1 states paragraph 7AA scopes out long-term foreign currency monetary items where the entity opted for the D13AA exemption of Ind AS 101. Such an entity continues its previous GAAP policy for exchange differences on those items recorded before the first Ind AS reporting period. The other options describe rules that the text does not contain.

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