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

Vindhya Power 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 its 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. The entity continues its previous GAAP policy for exchange differences on them, because it opted for the Ind AS 101 exemption in paragraph D13AA.

  1. AThey are scoped out of Ind AS 21 by paragraph 7AACorrect
  2. BThey must be restated at the closing rate with differences in profit or loss
  3. CThey must be restated at historical rates retrospectively
  4. DThey are treated as non-monetary items under Ind AS 21

Explanation

Paragraph 7AA was inserted 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. So Ind AS 21 treatment does not apply to them, and the previous GAAP policy continues. Applying closing-rate recognition in profit or loss ignores the scope-out.

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