International Financial Management: An Analytical Framework, 2nd Edition by Pearson

182 INTERNATIONAL FINANCIAL MANAGEMENT

monetary liabilities involve an obligation to pay. The firm knows in advance when such claims

will get realized and when the obligations have to be discharged. That is, the size and timing

of cash flows are known in advance in the case of monetary items of the balance sheet.

Items like long-term debt, trade creditors, sundry debtors, deposits, overdrafts, and cash

are examples of monetary items of the balance sheet. Non-monetary balance sheet items

are also known as real assets and liabilities. They include physical assets, human assets,

inventory, etc. Thus, non-monetary assets and liabilities are those that do not have contractual

payoffs.

Under the monetary/non-monetary method, monetary items are translated ...