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Disclosures
Extract from FRS102: Section 30.24 -30.27
30.24 In paragraphs 30.26 and 30.27, references to functional currency apply, in the case of a group, to the functional currency of the parent.
30.25 An entity shall disclose the following:
(a) the amount of exchange differences recognised in profit or loss during the period, except for those arising on financial instruments measured at fair value through profit or loss in accordance with Sections 11 Basic Financial Instruments and Section 12.
(b) the amount of exchange differences arising during the period and classified in equity at the end of the period.
30.26 An entity shall disclose the currency in which the financial statements are presented. When the presentation currency is different from the functional currency, an entity shall state that fact and shall disclose the functional currency and the reason for using a different presentation currency.
30.27 When there is a change in the functional currency of either the reporting entity or a significant foreign operation, the entity shall disclose that fact and the reason for the change in functional currency.
OmniPro comment
See illustration of these requirements below.
Example 18 – Extract from notes to the accounting policies
The company has chosen to present the financial statement in a currency that differs from its functional currency so that it can be easily consolidated into the parent company’s financial statements. The functional currency of the company is XXXX
Extract from the financial statements – operating profit note
OPERATING PROFIT
Operating profit is stated after charging/(crediting):
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2015 |
2014 |
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|
CU |
CU |
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Depreciation |
149,999 |
170,037 |
|
Directors’ remuneration: |
212,000 |
225,600 |
|
Impairment of goodwill (included within administrative expenses) |
– |
– |
|
Foreign exchange gain/loss |
– |
– |
|
Impairment of investment in subsidiary/associate/joint venture |
– |
– |
|
Reversal of impairment of property, plant and equipment (included within administrative expenses) See note 1 |
– |
– |
|
Reversal of impairment of goodwill/intangibles (included within administrative expenses) |
– |
– |
|
Reversal of impairment of inventory (included within cost of sales) |
– |
– |
|
Impairment of inventory (included within cost of sales) |
– |
– |
|
Inventory recognised as an expense |
– |
– |
|
Auditors’ remuneration |
|
|
|
Audit |
13,000 |
13,000 |
|
Non audit services |
3,000 |
3,000 |
|
Tax Advisory |
3,225 |
3,225 |
Extract from other comprehensive income showing foreign exchange differences on retranslation
Consolidated Statement of Comprehensive Income
|
Profit for the financial year |
1,000,000 |
500,000 |
|
Cash flow hedges |
|
|
|
– effective portion of changes in fair value to cash flow hedges |
9 XXX |
XXX |
|
– fair value of cash flow hedges transferred to income statement |
10 XXX |
XXX |
|
Actuarial loss in respect of the defined pension scheme |
11 (XXX) |
(XXX) |
|
Exchange differences on retranslation of subsidiary undertakings |
XXX |
(XXX) |
|
Gain/(loss) on revaluation of intangible assets |
12 XXX |
(XXX) |
|
Gain/(loss) on revaluation of property, plant and equipment |
13 XXX |
(XXX) |
|
Gain/(loss) on revaluation of subsidiaries, associates, etc. |
14 XXX |
(XXX) |
|
Deferred tax on components of other comprehensive income |
15 XXX |
XXX |
|
|
|
|
|
Total other comprehensive income for the year net of tax |
200,000 |
(100,000) |
|
|
|
|
|
Total comprehensive income for the year |
1,200,000 |
400,000 |
|
Total comprehensive income for the financial year attributable to: |
|
|
|
Owners of the parent company |
XXX |
XXX |
|
|
1,200,000 |
400,000 |
Example 19: Example of a change of functional currency due a change in circumstance i.e. adjusted prospectively
Change in functional currency
The company changed functional currency from FC (“FC”) to United States Dollar (“USFC”) on 31 December 2014. This change arose as a result of the acquisition of the company by a larger group. As a result a change was made to the cost and funding structure such that the primary economic environment in which the company operates resulted in a change in functional currency to USFC.
– All resulting exchange differences were recognised as a separate component of equity, described as the exchange rate reserve.
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Restated |
|
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|
2014 |
2014 |
|
|
USFC |
FC |
|
|
|
|
|
Turnover |
237,601 |
146,134 |
|
|
|
|
|
Cost of sales |
(220,264) |
(135,471) |
|
|
|
|
|
Gross profit |
17,337 |
10,663 |
|
|
|
|
|
Administrative expenses |
(16,066) |
(9,882) |
|
Other operating income |
– |
– |
|
|
|
|
|
Operating profit |
1,270 |
781 |
|
|
|
|
|
Interest receivable |
– |
– |
|
Interest payable and similar charges |
(355) |
(218) |
|
|
|
|
|
Profit on ordinary activities before taxation |
916 |
563 |
|
|
|
|
|
Tax on profit |
(416) |
(256) |
|
|
|
|
|
Profit / (loss) for the financial period after taxation |
499 |
307 |
|
Balance sheet |
Restated |
|
|
2014 |
2014 |
|
|
USFC |
FC |
|
|
Fixed assets |
||
|
Tangible assets |
5,637 |
3,483 |
|
Investments |
8,810 |
5,443 |
|
14,447 |
8,927 |
|
|
Current assets |
||
|
Debtors |
387,831 |
239,641 |
|
Cash at bank and in hand |
32,999 |
20,390 |
|
420,831 |
260,031 |
|
|
Creditors: amounts falling due within one year |
(255,617) |
(157,946) |
|
Net current assets |
165,214 |
102,086 |
|
Creditors: amounts falling due after more than one year |
(5,273) |
(3,258) |
|
Provision for liabilities |
(1,900) |
(1,174) |
|
|
|
|
|
Net assets |
172,488 |
106,581 |
|
Capital and reserves |
||
|
Called-up share capital |
6 |
3 |
|
Other reserve |
64,548 |
39,884 |
|
Profit and loss account |
107,935 |
66,693 |
|
|
|
|
|
Equity shareholder’s funds |
172,488 |
106,581 |
Example 20: Example of a Prior year adjustment due to a change in functional currency
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Historically, financial statements for the company were prepared on the basis that the FC was the functional currency of the entity. During the current year the directors considered further the functional currency and have determined that the CU is, and always was, the functional currency that most accurately portrays the economic results of the company and thereby achieves the objective of foreign currency translation. As a result, the financial statements for the year ended 31 December 2015 are prepared in CU and the comparative numbers restated. |
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The 2014 results and financial position for comparative purposes were restated to CU as follows: |
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-Assets and liabilities which were denominated in CU are shown at the actual CU balance at 31 December 2014 and non CU denominated balances were retranslated at the year end spot rate |
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-Income and expenses for 2014 are shown at the actual CU amounts that were incurred and any non CU balances were retranslated at the average rate for the year. |
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-All resulting differences were recognised in profit and loss reserves brought forward. |
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