IAS- 21

Definitions

Foreign currency: A currency other than the functional currency of the entity.

Functional currency: The currency of the primary economic environment in which the entity
operates.

Presentation currency: The currency in which the financial statements are presented.

Exchange rate: The ratio of exchange for two currencies.

Closing rate: The spot exchange rate at the reporting date.

Spot exchange rate: The exchange rate for immediate delivery.

Exchange difference: The difference resulting from translating a given number of units of one
currency into another currency at different exchange rates.

Monetary items: Are units of currency held and assets and liabilities to be received or paid in a
fixed or determinable number of units of currency.

A group: is a parent and all its subsidiaries.

Foreign operations: are defined as any subsidiary, associate, joint venture or branch of a
reporting entity, the activities of which are based or conducted in a country or currency other
than those of the reporting entity.

Net investment in a foreign operation: is the amount of the reporting entity’s interest in the net
assets of that operation.

Page 1 of 2
 IAS- 21

Monetary items

The essential feature of a monetary item, as the definition implies, is the right to receive (or an
obligation to deliver) a fixed or determinable number of units of currency.

Examples of monetary assets include:

1. Cash and bank balances

2. Trade receivables and payables
3. Loan receivables and payables
4. Foreign currency bonds held as available for sale
5. Foreign currency bonds held to maturity
6. Pensions and other employee benefits to be paid in cash
7. Provisions that are to be settled in cash
8. Cash dividends that are recognized as a liability
9. A contract to receive (or deliver) a variable number of the entity’s own equity
instruments or a variable amount of assets in which the fair value to be received (or
delivered) equals a fixed or determinable number of units of currency

Non-monetary items

A non-monetary item does not give the right to receive or create the obligation to deliver a fixed
or determinable number of units of currency.

Examples of non-monetary items include:

1. Amounts prepaid for goods and services (e.g. prepaid rent)

2. Goodwill
3. Intangible assets
4. Inventories
5. Property, plant and equipment
6. Provisions to be settled by the delivery of a non-monetary asset
7. Equity instruments that are held as available for sale financial assets
8. Equity investments in subsidiaries, associates or joint ventures

Page 2 of 2