Monetary item
Examples include cash, trade receivables and trade payables. At each reporting date, foreign-currency monetary items are translated into functional currency using the closing rate, with exchange differences generally recognised in profit or loss subject to specific exceptions. Non-monetary items are translated according to whether they are measured at historical cost or fair value; their carrying amount in money does not itself make them monetary.
Worked example
A company with euro functional currency owes a supplier $1,000. At the reporting date $1 equals €0.90, so the monetary payable translates to €900, and the exchange difference from the previous carrying amount is accounted for under IAS 21.
Common mistake
Translating historical-cost inventory at closing rate merely because its price was denominated in a foreign currency.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |