Hi
Assume the following:
My functional currency is USD and my presentation currency is Mauritian Rupees (MUR).
There is a transaction / balance which is originally in MUR. How should I proceed to present it in my Statement of profit or loss and balance sheet (which is in the presentation currency [MUR])
Option 1 : Translate the MUR transaction / balance into the functional currency (USD) and then for presentation purposes translate it back into MUR using average / closing rates (this will lead to a difference between the original amount and the amount presented in the financial statements)
Option 2: Use the original transaction / balance amount in MUR and put it in the financial statements
For me, Option 1 is more realistic based on IAS 21.21 & 38 which states that:
"A foreign currency transaction shall be recorded, on initial recognition in the functional currency ..." [IAS 21.21]
"If the presentation currency differs from the entity’s functional currency, it translates its results and financial position into the presentation currency." [IAS 21.38]
MUR initially is a foreign currency which should be translated into the functional currency (USD) [IAS 21.21]. Then the second step is to present the accounts in MUR and we retranslate everything from USD to MUR [IAS 21.38].
Can you please advise on your views and, if possible, please send the IFRS refence which are applicable.
Thanks
Foreign currency same as Presentation currency but different from functional currency
Re: Foreign currency same as Presentation currency but different from functional currency
It's option 1. You have already included the relevant IFRS paragraphs.