International Journal of Accounting, Finance and Risk Management

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IAS 21 - The Effects of Changes in Foreign Exchange Rates: Matters Arising

Received: 22 May 2022    Accepted: 20 June 2022    Published: 13 July 2022
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Abstract

One of the aims of the International Accounting Standard Board (IASB) is to enhance the quality of financial reporting and ensure universality in comparison of financial statements produced in different entities and countries by users of such financial statements. International Accounting Standard (IAS) 21: Effect of Changes in Foreign Exchange Rates is applicable to Multinational entities and businesses that engage in Foreign Currency denominated transactions. Thus, this study examines IAS 21 and matters arising from its adoption and application. The objective, scope, measurement and presentation are discussed as it affects entities with foreign operations such as subsidiaries, associates, joint venture and branch of an entity operating under a different environment subjected to different laws and currency of exchange. The study employs exploratory method in discussing concepts like Currency Translation, Foreign Currency Transactions, Foreign Currency Translations and Functional Currency Determination with the Stakeholder Salience Theory as the underpinning theory. Closing Rates, Exchange Rates and Fair Value of non-monetary items were examined as they pertain to Reporting of Foreign Currency Transactions. The application of the standard does not cover items covered by other standards such as IAS 39 on Financial Instruments, IAS 7 on Statement of Cashflow. Lack of Exchangeability of Cryptocurrencies have been identified as the main constraint in the application of the standard on virtual currency transactions Thus the study concludes that, although the standard provides the framework for accounting for foreign operations denominated in foreign currencies, management discretion might override the principles as other matters relating to foreign operations are still not addressed. It is therefore recommended that, While the IASB attempt to address currency exchangeability is appropriate, IAS 21 should address the impact of virtual currencies (cryptocurrencies) on overseas transactions and translations.

DOI 10.11648/j.ijafrm.20220703.11
Published in International Journal of Accounting, Finance and Risk Management (Volume 7, Issue 3, September 2022)
Page(s) 92-98
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Cryptocurrency, Foreign Exchange Rates, Foreign Exchange Transactions, Foreign Exchange Translations, IAS

References
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[3] Braithwaite, J. (2012). Rules and principles: A theory of legal certainty. Australian Journal of Legal Philosophy, 27, 47–82.
[4] Cayirli, O. (2018). IAS 21 - The effects of changes in foreign exchange rates: A review of concepts and related issues (1–20).
[5] Donelson, D. C., McInnis, J. M., & Mergenthaler, R. D. (2012) Rules-based accounting standards and litigation. The Accounting Review, 87 (4), 1247-1279.
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[7] ke, J., Vdoviak, M., Pilař, T., & Čermáková, A. (2020). Revenue management of changes in foreign exchange rates: A case study of production companies with foreign participation in the Czech. Economic Annals-XXI., 181 (1), 115–123.
[8] IAS 21. The Effects of Changes in Foreign Exchange Rates. International Financial Reporting Standards Foundation.
[9] Korableva, A. (2018), “Empirical investigation into the determinants of compliance with IFRS 7 disclosure requirements”, AUDOE, 11 (2), 5-17.
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[17] Pelucio-Grecco, M. C., dos Santos Neto, J. P., & Constancio, D. (2020). Accounting for bitcoins in light of IFRS and tax aspects. Revista Contabilidade Financas, 31 (83), 275–282.
[18] Procházka, D. (2018). Accounting for bitcoin and other cryptocurrencies under IFRS: A comparison and assessment of competing models. International Journal of Digital Accounting Research, 18 (11), 161–188.
[19] Robinson, T. R., Henry, E., Pirie, W. L., Broihahn, M. A. (2015). International Financial Statement Analysis, 3e. Hoboken, New Jersey: John Wiley & Sons, Inc.
[20] Tawiah, V., & Boolaky, P. (2019). Determinants of IFRS compliance in Africa: analysis of stakeholder attributes. International Journal of Accounting and Information Management, 27 (4), 573–599.
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Cite This Article
  • APA Style

    Emuebie Emeke, Ogundeyi Adebayo, Fakuade Olufunmilayo, Tunji Shiyanbola. (2022). IAS 21 - The Effects of Changes in Foreign Exchange Rates: Matters Arising. International Journal of Accounting, Finance and Risk Management, 7(3), 92-98. https://doi.org/10.11648/j.ijafrm.20220703.11

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    ACS Style

    Emuebie Emeke; Ogundeyi Adebayo; Fakuade Olufunmilayo; Tunji Shiyanbola. IAS 21 - The Effects of Changes in Foreign Exchange Rates: Matters Arising. Int. J. Account. Finance Risk Manag. 2022, 7(3), 92-98. doi: 10.11648/j.ijafrm.20220703.11

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    AMA Style

    Emuebie Emeke, Ogundeyi Adebayo, Fakuade Olufunmilayo, Tunji Shiyanbola. IAS 21 - The Effects of Changes in Foreign Exchange Rates: Matters Arising. Int J Account Finance Risk Manag. 2022;7(3):92-98. doi: 10.11648/j.ijafrm.20220703.11

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  • @article{10.11648/j.ijafrm.20220703.11,
      author = {Emuebie Emeke and Ogundeyi Adebayo and Fakuade Olufunmilayo and Tunji Shiyanbola},
      title = {IAS 21 - The Effects of Changes in Foreign Exchange Rates: Matters Arising},
      journal = {International Journal of Accounting, Finance and Risk Management},
      volume = {7},
      number = {3},
      pages = {92-98},
      doi = {10.11648/j.ijafrm.20220703.11},
      url = {https://doi.org/10.11648/j.ijafrm.20220703.11},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20220703.11},
      abstract = {One of the aims of the International Accounting Standard Board (IASB) is to enhance the quality of financial reporting and ensure universality in comparison of financial statements produced in different entities and countries by users of such financial statements. International Accounting Standard (IAS) 21: Effect of Changes in Foreign Exchange Rates is applicable to Multinational entities and businesses that engage in Foreign Currency denominated transactions. Thus, this study examines IAS 21 and matters arising from its adoption and application. The objective, scope, measurement and presentation are discussed as it affects entities with foreign operations such as subsidiaries, associates, joint venture and branch of an entity operating under a different environment subjected to different laws and currency of exchange. The study employs exploratory method in discussing concepts like Currency Translation, Foreign Currency Transactions, Foreign Currency Translations and Functional Currency Determination with the Stakeholder Salience Theory as the underpinning theory. Closing Rates, Exchange Rates and Fair Value of non-monetary items were examined as they pertain to Reporting of Foreign Currency Transactions. The application of the standard does not cover items covered by other standards such as IAS 39 on Financial Instruments, IAS 7 on Statement of Cashflow. Lack of Exchangeability of Cryptocurrencies have been identified as the main constraint in the application of the standard on virtual currency transactions Thus the study concludes that, although the standard provides the framework for accounting for foreign operations denominated in foreign currencies, management discretion might override the principles as other matters relating to foreign operations are still not addressed. It is therefore recommended that, While the IASB attempt to address currency exchangeability is appropriate, IAS 21 should address the impact of virtual currencies (cryptocurrencies) on overseas transactions and translations.},
     year = {2022}
    }
    

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  • TY  - JOUR
    T1  - IAS 21 - The Effects of Changes in Foreign Exchange Rates: Matters Arising
    AU  - Emuebie Emeke
    AU  - Ogundeyi Adebayo
    AU  - Fakuade Olufunmilayo
    AU  - Tunji Shiyanbola
    Y1  - 2022/07/13
    PY  - 2022
    N1  - https://doi.org/10.11648/j.ijafrm.20220703.11
    DO  - 10.11648/j.ijafrm.20220703.11
    T2  - International Journal of Accounting, Finance and Risk Management
    JF  - International Journal of Accounting, Finance and Risk Management
    JO  - International Journal of Accounting, Finance and Risk Management
    SP  - 92
    EP  - 98
    PB  - Science Publishing Group
    SN  - 2578-9376
    UR  - https://doi.org/10.11648/j.ijafrm.20220703.11
    AB  - One of the aims of the International Accounting Standard Board (IASB) is to enhance the quality of financial reporting and ensure universality in comparison of financial statements produced in different entities and countries by users of such financial statements. International Accounting Standard (IAS) 21: Effect of Changes in Foreign Exchange Rates is applicable to Multinational entities and businesses that engage in Foreign Currency denominated transactions. Thus, this study examines IAS 21 and matters arising from its adoption and application. The objective, scope, measurement and presentation are discussed as it affects entities with foreign operations such as subsidiaries, associates, joint venture and branch of an entity operating under a different environment subjected to different laws and currency of exchange. The study employs exploratory method in discussing concepts like Currency Translation, Foreign Currency Transactions, Foreign Currency Translations and Functional Currency Determination with the Stakeholder Salience Theory as the underpinning theory. Closing Rates, Exchange Rates and Fair Value of non-monetary items were examined as they pertain to Reporting of Foreign Currency Transactions. The application of the standard does not cover items covered by other standards such as IAS 39 on Financial Instruments, IAS 7 on Statement of Cashflow. Lack of Exchangeability of Cryptocurrencies have been identified as the main constraint in the application of the standard on virtual currency transactions Thus the study concludes that, although the standard provides the framework for accounting for foreign operations denominated in foreign currencies, management discretion might override the principles as other matters relating to foreign operations are still not addressed. It is therefore recommended that, While the IASB attempt to address currency exchangeability is appropriate, IAS 21 should address the impact of virtual currencies (cryptocurrencies) on overseas transactions and translations.
    VL  - 7
    IS  - 3
    ER  - 

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Author Information
  • School of Management Sciences, Babcock University, Ilishan-Remo, Nigeria

  • School of Management Sciences, Babcock University, Ilishan-Remo, Nigeria

  • School of Management Sciences, Babcock University, Ilishan-Remo, Nigeria

  • School of Management Sciences, Babcock University, Ilishan-Remo, Nigeria

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