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THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES

Definitions

• Average rate: average exchange rate over a specified

period

• Monetary items – units of currency held, and assets and

liabilities to be received or paid, in a fixed or
determinable number of units of currency, for example,

bank accounts, fixed deposits, trade receivables, loans,

and trade payables.

• Non-monetary items – the essential feature is the

absence of a right to receive (or an obligation to deliver)
a fixed or determinable number of units of currency, for

example inventories and property, plant and equipment.

• Fair value – the price that would be received to sell an

asset or paid to transfer a liability in an orderly
transaction between market participants at the

measurement date.

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