[Checklist] Disclosure requirements under Ind AS 21 | Effects of Changes in Foreign Exchange Rates

An entity may carry on foreign activities in two ways. It may have transactions in foreign currencies or it may have foreign operations. In addition, an entity may present its financial statements in a foreign currency. The objective of Ind AS 21: The Effects of Changes in Foreign Exchange Rates, is to prescribe how to include foreign currency transactions and foreign operations in the financial statements of an entity and how to translate financial statements into a presentation currency. Under this Ind AS principal issues are which exchange rate(s) to use and how to report the effects of changes in exchange rates in the financial statements.

As per the requirement of this Ind AS, an entity is required to follow the below-mentioned disclosure requirements:

Whether the entity has disclosed:

(a) the amount of exchange differences recognized in profit or loss except for those arising on financial instruments measured at fair value through profit or loss in accordance with Ind AS 109; and

(b) net exchange differences recognized in other comprehensive income and accumulated in a separate component of equity, and a reconciliation of the amount of such exchange differences at the beginning and end of the period.

When the presentation currency is different from the functional currency, that fact shall be stated, together with disclosure of the functional currency and the reason for using a different presentation currency.

When there is a change in the functional currency of either the reporting entity or a significant foreign operation, that fact, the reason for the change in functional currency and the date of change in functional currency shall be disclosed.

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