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Dear group members! Could provide me a tip on the following: the company has bonds which are in a foreign currency. The company concluded a sale contract for these bonds before the YE date where the company and the purchaser has fixed the rate of conversion for a sale of the bonds that would happend after YE. Should the company translate into functional currency at year end rate or at the rate which has been already fixed in the contract? The sale happend after the YE as was per the contract.

Hi,

Are the bonds and sales two separate things you want to have an answer or they are linked ?

The sale is event after the YE. So my question is about the rate of translation at the YE

For the bonds, which are monetary items, the exchange rate to be used is the closing rate and the end of the reporting period.

I think, for the sales and receivables, the rate to be used is the rate stated in the contract.

IAS21.26:

"When several exchange rates are available, the rate used is that at which the future cash flows represented by the transaction or balance could have been settled if those cash flows had occurred at the measurement date. If exchangeability between two currencies is temporarily lacking, the rate used is the first subsequent rate at which exchanges could be made."

If you keep them at year-end, then use the year-end fx rate. But double check if you don't need to derecognise these bonds before year-end. BTW what's the reason for the delay between signing the contract and the actual sale? What needs to happen between these two dates.

Related KB page:

https://ifrscommunity.com/knowledge-bas ... al-assets/

Thank you!
the parties agreed that the ownership is transfered at the date of the state registration of a holder change, both parties should place a notice to the registrar within 30 days from the contract day. The notice and the registration has happend after the YE.

This sounds like some administrative task only, I would carefully consider the derecognition criteria.

Sorry I misread the original post, I didn't know that it was the sale of the bond.

I am sorry also, I have clarified it as I meant sale of bonds and corrected my original post to be more clear

Just let me jump on this fortunate mistake. If you've made a normal sale or purchase of goods with a contractual exchange rate, in that case, I would translate the sale/purchase and the receivable at the contractual rate with no subsequent re-translation at the year end closing exchange rate. Do you agree guys?

I asked this question because I don't know if there is a embedded derivatives in that case.

it seems you're mixing up monetary and non-monetary items Leo, have a read:

https://ifrscommunity.com/knowledge-bas ... ting-dates

Hi Marek, I'm not sure you understood my question, which is do you retranslate clients receivables at the year end when there is a fixed rate in the contract already. I know that this is a monetary item. For example,

Company A (functional currency in Euros) made a sale of 120 USD with a client in the US, and the translation rate stated in the contract is 1 euros for 1.2 USD.
So, you would debit receivables for 100 euros and credit sales for 100 euros.

At year end, if the spot rate became 1 euros for 2 USD, do you :

Solution 1 :

debit exchange rate loss for 40 (P&L)
credit receivables for 40 (Balance sheet)

Solution 2 :

debit exchange rate loss for 40 (P&L)
credit receivables for 40 (Balance sheet)
debit derivatives for 40 (Balance sheet)
credit exchange rate gain for 40 (P&L)

or Solution 3:

DO NOTHING

Thanks

how much do you actually receive if the spot rate changes to 1 EUR for 2 USD?

200 USD

so this is an EUR-denominated receivable, you don't retranslate it after initial recognition, you just record 100 EUR and ignore fx rates movements

Thanks for your confirmation !