Introduction
 
Participants are required to bring along a calculator 
 
The effect of changes in foreign exchange rate can significantly affect the valuation of assets and liabilities at the initial recognition because the Standard required measurement of foreign assets and liabilities at spot rate at date of transaction. Subsequent to initial recognition of an asset and a liability depending on whether these are monetary or non-monetary items an entity may be required to re-measure the amounts using closing exchange rate at end of reporting period, thus creating volatility in the financial performance and financial position from one period to another. In situation where an entity has foreign operations such as a subsidiary, further complication arises in the measurement of goodwill, fair value adjustment and allocation of foreign exchange difference between the entity and non-controlling interest. Last but not least, the complexity of accounting can be compounded by the used of foreign currency derivatives to hedge against the foreign currency risk where hedge accounting is applied.
 

• to provide practical guidance on determining functional currency
• to explain the principles of presenting and reporting transaction involving changes in foreign exchange rates
• setting up accounting systems for recording changes in foreign exchanges rates including hedge accounting
• designing spreadsheet working papers to translate foreign subsidiaries with different functional currency from the group’s presentation currency
• to provide step-by-step guidance on the preparation of statement of cash flows involving foreign exchange transactions and foreign operations cash flows
• to provide set-by-step guide to handling foreign currency derivatives as well as  hedge accounting system for hedging of foreign currency exposure
• to present and disclose foreign exchange gain or loss in profit or loss and other comprehensive income
• to provide an introduction to the effect of hyperinflationary effects on foreign operations
• explaining the impact of changes foreign exchange rates on the financial performance, financial position and cash flows of an entity and the group
• to use clear and easy to understand case studies to illustrate the issues covered in the outlines below

Programme Outline

• Introduction and Overview for effects of foreign exchange differences
  • Relationship between: presentation currency; functional currency and foreign currency
  • Accounting system for converting foreign currency into functional currency
  • Accounting system for converting functional currency into presentation currency
  • Choosing and deciding functional currency

• Accounting for effect of foreign exchange differences in an individual company’s financial statements
  • Translating and accounting for foreign currency into functional currency
    • Dealing with foreign currency at initial recognition
    • Dealing with foreign currency assets and liabilities in subsequent periods
    • Identifying monetary and non-monetary items
    • Accounting for non-monetary items remeasured at fair value, net realisable value or recoverable amount
    • Tracking realised and unrealised foreign exchange gain and loss

• When an entity’s presentation currency is difference from functional currency
  • Procedures for translating functional currency into presentation currency
  • How to translate an entity’s profit or loss and other comprehensive income into presentation currency
  • How to translate an entity’s assets and liabilities into presentation currency
  • Dealing with translation foreign exchange gain or loss as a resulting translating functional currency into presentation currency

• Effect of foreign exchanges differences on business combinations:
  • Foreign exchange on consolidated goodwill
  • Foreign exchange on fair value adjustments

• Foreign subsidiary’s functional currency is different from the group’s presentation currency
  • Procedures for translating functional currency of a foreign subsidiary into presentation currency of the parent for consolidation purposes
  • How to handle foreign exchange translation reserve arising foreign subsidiaries and associates:
    • Presentation in other comprehensive income
    • Reclassification adjustment upon disposal
  • Translating foreign associate’s functional currency into presentation currency of an investor for equity accounting purposes
  • The effect of hyperinflation on translating functional currency into presentation currency

• Accounting for foreign exchange difference arising from net investment in foreign subsidiaries and associates:
  • Monetary item in the functional currency of the subsidiary
  • Monetary item in the functional currency of the parent
  • Monetary item in neither functional currency of parent nor subsidiary

• Foreign currency and statement of cash flows:
  • Effect of realised and unrealised foreign exchange on statement of cash flows
  • Preparing and presenting consolidated statement of cash flows involving foreign subsidiaries and associates

• Accounting for foreign currency derivative instruments:
  • How to use derivatives to manage foreign exchange exposure
  • Foreign currency forward/future contracts:
    • Accounting for foreign currency forward/future contracts
    • Accounting for foreign currency cash flow hedge and fair value hedge
    • Basis adjustment of foreign exchange gain or loss in a cash flow hedge

• Disclosure Requirements for foreign currency
  • Foreign currency risk disclosure
  • Disclosure requirement on functional currency and presentation currency

Intended For

Accountants, Auditors, Finance Directors and Managers