Shares in Affiliated Companies in Foreign Currency

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asalaag
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Joined: 01 Jun 2022, 17:36

Shares in Affiliated Companies in Foreign Currency

Post by asalaag »

Hello,

I hope you're doing great.

I have a question regarding accounting under IFRS, and I don't have that much of experience with it. The case is like this:

Company Y is a parent and all of its subsidiaries are fully consolidated. One of its subsidiaries (Entity B) holds 100% of shares of two of the subsidiaries (Entities C and D), and the shares appear as a non-financial asset (shares in affiliated companies) in Entity B financial statements, and are accounted for at cost. However, the issue is that Entity B has a different functional currency that entities C and D. Every month they make an adjustment for the shares in affiliated companies item to reflect the change in the currency on a monthly basis. Is this permitted under IFRS? Would really appreciate it if you can refer me to the standard and the paragraph!

Thanks a lot :)
Leo
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Joined: 05 Apr 2020, 22:31

Re: Shares in Affiliated Companies in Foreign Currency

Post by Leo »

Hi,

It's no monetary, so, only at historical costs :

https://www.cpdbox.com/monetary-non-monetary/
JRSB
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Re: Shares in Affiliated Companies in Foreign Currency

Post by JRSB »

is the functional currency of C and D relevant? are you saying the purchase of shares in C and D, by B, was denominated in a currency other than B's reporting currency?
asalaag
Posts: 5
Joined: 01 Jun 2022, 17:36

Re: Shares in Affiliated Companies in Foreign Currency

Post by asalaag »

JRSB wrote: 01 Jun 2022, 19:18 is the functional currency of C and D relevant? are you saying the purchase of shares in C and D, by B, was denominated in a currency other than B's reporting currency?
Hey! Thank you for your reply. Yes, the purchase was in was denominated in a currency other than B's reporting currency. Also, to be honest I'm not sure if the purchase in the first place should be measured at fair value or cost.
asalaag
Posts: 5
Joined: 01 Jun 2022, 17:36

Re: Shares in Affiliated Companies in Foreign Currency

Post by asalaag »

Leo wrote: 01 Jun 2022, 18:04 Hi,

It's no monetary, so, only at historical costs :

https://www.cpdbox.com/monetary-non-monetary/
Thank you for your reply, do you know if it should be measured at fair value or cost? because I'm not sure about this part also.
JRSB
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Re: Shares in Affiliated Companies in Foreign Currency

Post by JRSB »

cost , fair value , or equity accounting.
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Marek Muc
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Re: Shares in Affiliated Companies in Foreign Currency

Post by Marek Muc »

As JRSB wrote, it's a policy choice:
https://ifrscommunity.com/knowledge-bas ... tatements/

it these shares are held at cost, then they shouldn't be retranslated after initial recognition as they are non-monetary items
https://ifrscommunity.com/knowledge-bas ... tary-items
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