Accounting for Investments, Volume 2: Fixed Income Securities and Interest Rate Derivatives—A Practitioner's Guide

FX TRANSLATION ON AVAILABLE-FOR-SALE SECURITIES

Under the relevant accounting standards, foreign currency monetary items are treated differently from foreign currency non-monetary items during subsequent recognition of those items on any valuation date. The essential feature of a monetary item is the right to receive or an obligation to deliver a fixed or determinable amount of units of currency. A non-monetary item does not have this right.

Exchange differences arise from the settlement of monetary items at a subsequent date to initial recognition, and re-measuring an entity’s monetary items at rates different from those at which they were initially recorded (either during the reporting period or at the previous reporting periods). Such exchange differences must be recognized as income or expense in the period in which they arise. If the transaction is settled in a different accounting period to that of the initial recognition of the transaction, the exchange difference to be recognized in each period is determined by the change in exchange rates during that period.

When a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss is also recognized in profit or loss. When a gain or loss on a non-monetary item is recognized directly in other comprehensive income, any exchange component of that gain or loss is recognized directly in other comprehensive income.

FX revaluation process

For every transaction denominated and recorded ...