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1. SUBSEQUENT MEASUREMENT
A foreign currency transaction may give rise to assets or liabilities that
are denominated in a foreign currency. These assets and liabilities will
need to be translated into the entity's functional currency at each
reporting date. How they will be translated depends on whether the
assets or liabilities are monetary or non-monetary items.
Monetary items:
Units of currency held and
assets and liabilities to be
received or paid (in cash), in a
fixed number of currency units.
Examples of monetary items
include cash itself, loans, trade
payables, trade receivables
and interest payable.
Non-monetary items:
are not defined by IAS 21, but
they are items that are not
monetary items. They include
tangible non-current assets,
investments in other companies,
investment properties and
deferred taxation (which is
a notional amount of tax rather
than an actual amount
of tax payable.)

2. MONETARY OR NON-MONETARY ITEMS
ASSETS
Monetary Items
Deferred tax assets
Net investment in lease
Trade receivables
Other receivables
Advances (to be received
back in cash)
Cash and bank (including
term deposits)
Investments in debt securities
Property, plant & equipment
Investment property
Intangible assets (including
goodwill)
Right of use assets
Investments in equity shares
Inventories
Advances for goods/services
Prepayments for expenses
Biological assets
Non-monetary Items
LIABILITIES
Monetary Items Non-monetary Items
Refund liability (to be settled
in cash)
Provisions (to be settled in cash)
Deferred tax liability
Current tax liability
Loans and borrowings
Trade payables
Accruals (to be paid in cash)
Cash dividend payable
Lease liability
Advance from customer (contract
liability)
Provisions (to be settled by delivery
of non-monetary assets)
Deferred Government Grant
Equity
In practice, equity items (share capital and reserves) are usually
treated as non-monetary items.

3. MONETARY OR NON-MONETARY ?
Is there a right/obligation to deliver fixed/determinable
amount of currency units?
YES
Monetary items
NO
Non-monetary items
Foreign currency monetary
items outstanding at the
reporting date shall be
translated using the
closing rate.
Exchange gain/loss on
such translation shall be
reported in P/L for the
period.
Non-monetary items carried at fair value
Non-monetary items carried at fair value are translated using the
exchange rate at the date when the fair value was determined.
Exchange gains or losses on non-monetary items are recognized
consistently with the recognition of gains or losses on an item
itself. For example, when an item is revalued with FV changes are
recognized in OCI, then exchange gain or loss is also recognized
in OCI, too.
Non-monetary items carried at historical cost
Non-monetary items carried at historical cost are translated using
the exchange rate on the date of transaction (historical rate).
They are not subsequently retranslated in the individual financial
statements of the entity unless there has been a change in their
underlying value e.g. impairment etc.

4. SUBSEQUENT MEASUREMENT
This table summarizes the subsequent accounting for
foreign currency transactions:
Monetary items (settled)
Exchange rate at the date
of receipt or payment
Closing rate
Not required
Exchange rate at the date
fair value was measured
Recognise in profit
or loss
Monetary items (unsettled)
Non-monetary items carried
at cost
Non-monetary items carried
at fair value
Recognise in profit
or loss
Not applicable
Recognized in the same
section as the gain or
loss from change in
valuation is recognized.
See NOTE.
Asset or liability Re-translate at
Exchange Gain
or Loss
Note:
-Under IAS 16 and IAS 38, revaluation
gain in recorded in other comprehensive
income, therefore, exchange difference
shall be recognized in other
comprehensive income as well.
-Under IAS 40, gain on fair value
increase in recognized in profit or loss,
therefore, exchange difference shall
be recognized in profit or loss as well.