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

Why does Ind AS 21 contain paragraph 7AA, which has no counterpart in IAS 21?

Paragraph 7AA scopes out long-term foreign currency monetary items for which an entity opted for the Ind AS 101 paragraph D13AA exemption, allowing it to continue its previous GAAP accounting for exchange differences. It is not a blanket exemption for all foreign currency items.

  1. ATo 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, continuing its previous GAAP policyCorrect
  2. BTo require all long-term foreign currency monetary items to be translated at the average rate
  3. CTo exempt all foreign currency borrowings from Ind AS 21 permanently
  4. DTo permit capitalisation of exchange differences on all monetary items under Ind AS 23

Explanation

Paragraph 7AA scopes out long-term foreign currency monetary items where the first-time adopter chose the Ind AS 101 exemption (D13AA) to continue the previous GAAP policy for exchange differences. It is not a general exemption for all borrowings, so the other options overstate or misstate it.

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