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THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES

Introduction

• An entity may have transactions in foreign currencies and/or

foreign operations.

• When an entity undertakes transactions denominated in

foreign currencies, for example, buying or selling goods

overseas denominated in foreign currencies, then the

results of these transactions are translated into the

presentation currency (Rand) for incorporation into the

financial statements of the entity.

• The entity can be conducting business through foreign

operations, for example, establishing a foreign branch to

handle the marketing and selling of its products overseas.

The results of the foreign operations (branch) will be

accounted for in the functional currency (rand). (IAS 21.1)

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