Foreign currency same as Presentation currency but different from functional currency

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Hussein
Posts: 15
Joined: 10 Oct 2022, 22:59

Foreign currency same as Presentation currency but different from functional currency

Post by Hussein »

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
DJP
Trusted Expert
Posts: 345
Joined: 26 Jun 2020, 15:57

Re: Foreign currency same as Presentation currency but different from functional currency

Post by DJP »

It's option 1. You have already included the relevant IFRS paragraphs.
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