Page 109 - IC26 LIFE INSURANCE FINANCE
P. 109
Initial Recognition of Foreign Transaction
Initially foreign currency transaction should be recorded by applying an exchange rate on the
date of transaction.
Alternatively average rate for a week or a month can be used if there is no significant
fluctuation in the exchange rate.
Reporting at balance sheet date
Assets/Liabilities Exchange Rate
Monetary Items Closing rate
Non- Monetary Items
-carried at historical cost On date of transaction
Contingent Liabilities Closing rate
Monetary items are money held and assets and liabilities to be received or paid in fixed or
determinable amounts of money. example debtors, creditors etc
Non-monetary items are assets and liabilities other than monetary items. Example fixed assets,
stock etc.
Closing rate is the exchange rate at the balance sheet date.
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