Summary 
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Compared to IFRS 
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• Accounting for transactions and balances in foreign currencies, except those derivative transactions and balances within the scope of AASB 139 Financial Instruments: Recognition and Measurement.
 

• Translating the results and financial position of foreign operations that are included in the financial report of the entity by consolidation, proportionate consolidation or equity accounting.
 

• Translating an entity’s results and financial position into a presentation currency.

• Hedge accounting for foreign currency items (AASB 139 applies in this situation).
 

• Presentation in a cash flow statement of cash flows arising from foreign currency transactions, or to the translation of cash flows of a foreign operation (AASB 107 Cash Flow Statements applies).

• Includes exchange rate, fair value, foreign currency, foreign operation, functional currency, monetary items and presentation currency.
• Some factors to consider in determining the functional currency of an entity include:
  • The currency that mainly influences sales prices for goods and services
   
  
  • The currency of funds from financing activities
   
  
  • In relation to a foreign operation, consideration of whether its activities are an extension of the reporting entity.
• The essential feature of a non-monetary item is a right to receive (or an obligation to deliver) a fixed or determinable number of units of currency.

• Each entity is required to determine its functional currency in accordance with this standard.
 

• The presentation currency of an entity can be any currency.

• Foreign currency transactions – record the financial effects into the functional currency:
  • At the date of the transaction, record the transaction using the transaction-date exchange rate.
   
  
  • Subsequent reporting dates:
    • Monetary items must be retranslated (ie. restated) using the closing rate (end of period rate).
     
    
    • Non-monetary items measured at fair value in foreign currency must be translated using the revaluation date exchange rate.
  • Exchange differences arising on restatement of monetary items at reporting date and settlement date at exchange rates different than when initially recognised are recognised as income or expense in the period of restatement.
   
  
  • Exchange differences on revalued non-monetary items are recognised consistent with the revaluation of those items, eg. directly against the revaluation reserve.
 

• Exchange differences arising on monetary items that form part of the reporting entity’s net investment in a foreign operation are recognised in the consolidated financial report as a separate component of equity but recognised in profit or loss on disposal of the net investment.
 

• Translating balances from the reporting entity’s functional currency into its presentation currency:
  • Assets and liabilities for each balance sheet presented (including comparatives) are translated at the closing rate at the date of that balance sheet.
   
  
  • Income and expenses for each income statement (including comparatives) are translated at exchange rates at the dates of the transactions or appropriate average rates.
   
  
  • Exchange differences arising from translation to presentation currency must be recognised as a separate component of equity.
• Foreign operations - translate balances into functional currency:
  • For revenues and expenses use the transaction date rates or appropriate average rates.
   
  
  • For monetary items in the balance sheet use the closing rate.
   
  
  • For non-monetary items carried at historical cost use transaction-date exchange rates.
   
  
  • For non-monetary items carried at fair value use valuation-date exchange rates.
   
  
  • Any exchange differences are recognised as a separate component of equity.
• On disposal of the foreign operation, the deferred cumulative amount of exchange differences in equity relating to that operation is recognised in profit or loss.

• Gains and losses on foreign currency transactions and exchange differences may have tax effects, to which AASB 112 Income Taxes applies.

• Amount of exchange differences recognised in profit or loss
 

• Net exchange differences recognised in equity, and a reconciliation from the start to end of the period
 

• When the presentation currency is different to the functional currency, the reasons for this and disclosure of what the functional currency is.
 

• When there is a change in the functional currency of either the reporting entity or a significant foreign operation, this and the reason for the change must be disclosed.
 

• When an entity presents its financial information or other financial information in a currency that is not its functional currency, it can only state that the financial statements comply with IFRS if they comply with all the requirements of each applicable standard (including AASB 121) and interpretation.