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Realized exchange – or Revaluation differences?

11 August 2010 3,000 views 4 Comments

Dear All,

We run a SAP system with a company in EUR as Local currency and USD as reporting currency. When we book a 100 EUR invoice automatically SAP books it based on the system rate as f.e.150 USD in the reporting currency. Sofar everthing is in order. When we pay the 100 EUR from a EUR bank account 14 days later USD rate is 1,4.  In Local currency we have no realized exchange differences nor revaluation differences. In the reporting currency however we are facing a difference of 10 USD. I tend to treat this difference as a revaluation difference, due to the fact that if we would have run a revaluation just before we did the payment the difference would have been posted as a revaluation difference. Do you agree to this methodology? Or based on what IAS or other IFRS rule it should be a realized exchange difference?

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4 Comments »

  • ifrslist
    ifrslist said:

    [New Post] Realized exchange – or Revaluation differences? – http://www.ifrslist.com/2010/08/realized...
    via Twitoaster

    # 11 August 2010 at 12:46 pm
  • IFRS List.com: Realized exchange – or Revaluation differences? — Accounting Blog said:

    [...] Susan S. Lewis, Ltd. wrote an interesting post today. Here’s a quick excerptWelcome to IFRSLIST.com, the free community where you can find resources, share experience, knowledge and ideas about IFRS, bAccounting/b and Auditing with more than 1.5k members. Sign-up and start a new discussion. … [...]

    # 11 August 2010 at 2:11 pm
  • Mladek said:

    The IAS you are looking for is 21 (IAS 21)

    BTW, you did not specify your functional currency (which you have to define in order to apply the IAS), so I am assuming the following:

    Your company primarily operates in a EUR country, keeps its books in EUR, publishes its primary reports in EUR but then also publishes a separate report in USD.

    In other words, I am assuming your functional currency, currency of record (accounting currency) and local currency are all the same (EUR); only your presentation currency (USD) is different.

    If the above is true, you should apply paragraph 39 “Translation to the presentation currency”

    Since this is a translation, the different exchange rates would only have an impact if the transaction effects two periods (i.e. the payable is incurred in period one but settled in period two or the expense is incurred to buy inventory in period one that is sold in period two).

    If it does, as per paragraph 39.c: “all resulting exchange differences shall be recognised in other comprehensive income.”

    # 12 August 2010 at 6:28 am
  • riyer0018 said:

    Assuming, Euro is your functional currency and USD is your presentatition currency, the tretment followed by is ok.

    At the reporting period ends, follow the requirement of para 39 and call your revaluation difference a/c (where you park the exhange differences) as an item of Other Comprehensive Income (“OCI”)

    # 16 August 2010 at 7:36 am

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