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Foreign currency translation

Definitions

1.1 Important definitions for foreign currency consolidations

 Functional currency – ‘currency of the primary economic
environment in which the entity operates.’ (IAS 21 para 8)

 Presentation currency – ‘currency in which the financial
statements are presented’ (IAS 21 para 8)

Rates

 Closing rate (CR) – rate of exchange in existence as at the year end.

 Historic rate (HR) – rate of exchange in existence at the time a

transaction occurs (AKA spot rate).

 Opening rate (OR) – rate of exchange in existence at the start of a

period.

 Average rate (AR) – average rate of exchange for a period.

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