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IAS 21- Recognition of exchange difference

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › IAS 21- Recognition of exchange difference

  • This topic has 1 reply, 2 voices, and was last updated 7 months ago by Stephen Widberg.
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  • Author
    Posts
  • January 15, 2022 at 4:53 am #646081
    Raphael97
    • Topics: 2
    • Replies: 2
    • ☆

    Scenario:

    Jay has purchased a PPE on 1 June 20×5 for 28million euro, with an estimated useful life of 5 years. At 31 May 20×6, the PPE had a fair value of 24million euro. The company uses revaluation model as per IAS 16 in the accounting for PPE.

    Exchange rate on:

    1 June 20×5 euro to pounds = 1.4
    31 May 20×6 euro to pounds = 1.3

    Dear Sir, may i know how should I treat this particular transaction in the financial statement of Jay as of 31 May 20×6?

    Also please do advise me on the following workings:

    On initial recognition $m $m
    Dr.PPE 20.00
    Cr. Bank 20.00

    At the year ended $m Rate Euro’m
    Balance b/d 20.00 1.4 28.00
    Depreciation (4.00) 1.4 (5.60)
    Historical carrying amount 16.00 22.40

    Revalued Amount (31 May 20×6) 18.46 1.3 24.00
    Increase in value (18.46-16) 2.46

    Breakdown of the increase in value:

    Due to rise in fair value (24-22.4)/1.4 1.14
    Due to foreign exchange movement (24/1.3)-(24/1.4) 1.32
    Total amount to be credited into OCI 2.46
    (included within revaluation reserves, no need
    separate out)

    January 15, 2022 at 1:01 pm #646111
    Stephen Widberg
    Moderator
    • Topics: 10
    • Replies: 2557
    • ☆☆☆☆☆

    Purchase – exchange rate at transaction date

    SFP date – if revalued, use exchange rate at date of valuation

    XD to OCI (assuming revaluation is upwards)

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