Exchange difference

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Foreign currency - translation - IAS 21.

An exchange difference is the difference resulting from translating a given number of units of one currency into another currency at different exchange rates.

Under IAS 21, exchange differences arising when monetary items are settled - or when monetary items are translated at rates different from those at which they were translated when initially recognised or in previous financial statements - are reported in profit or loss in the period, with one exception.

The exception is that exchange differences arising on monetary items that form part of the reporting entity's net investment in a foreign operation are recognised - in the consolidated financial statements that include the foreign operation - in other comprehensive income.

Those exchange differences are then recognised in profit or loss on disposal of the net investment.

Russia-Ukraine - investor relations
"Investors, lenders and credit rating agencies may want to understand the extent of any direct or indirect exposures resulting from the invasion of Ukraine.
It is critical that the treasurer is able to articulate the materiality of any impacts to the company and its operations and what additional steps are being taken to mitigate any existing or potential risks that may emerge or become significant.
- Will you need to take any impairment charges?
- Will you need to assess any Cumulative Currency Translation Differences in the balance sheet that may have an impact on the Income Statement following divestment / impairment?
- Will this and other changes potentially affect any of your covenants?"
Russia-Ukraine: a treasurer's checklist - Association of Corporate Treasurers - 3 March 2022.

See also

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