Closing rate
In functional-currency financial statements, translate foreign-currency monetary items at the closing rate at each reporting date. When translating a foreign operation into a presentation currency, IAS 21 generally uses the closing rate for assets and liabilities and transaction-date rates for income and expenses, subject to the standard’s special rules. Distinguish retranslation of a monetary item from translation of a foreign operation.
Worked example
A dollar payable is $1,000 at the reporting date. If the closing rate is €0.90 per $1, its translated amount is €900 in an entity with euro functional currency.
Common mistake
Applying closing rates indiscriminately to income and expense in foreign-operation translation, or to historical-cost non-monetary items.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |