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    Introduction of The Euro: SIC Interpretation 7

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    Rolando G. Cua Jr.
    SIC-7 provides guidance on accounting for the introduction of the Euro currency. It states that the requirements of IAS 21 regarding foreign currency translation should be strictly applied to the changeover to the Euro. This means that (a) foreign currency monetary assets and liabilities should continue to be translated at the closing rate, (b) cumulative exchange differences on foreign operations in other comprehensive income should be reclassified to profit or loss only on disposal of the net investment, and (c) exchange differences on liabilities in participating currencies should not be included in related assets. The interpretation became effective in June 1998.

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    Introduction of The Euro: SIC Interpretation 7

    Uploaded by

    Rolando G. Cua Jr.
    31 views4 pages
    SIC-7 provides guidance on accounting for the introduction of the Euro currency. It states that the requirements of IAS 21 regarding foreign currency translation should be strictly applied to the changeover to the Euro. This means that (a) foreign currency monetary assets and liabilities should continue to be translated at the closing rate, (b) cumulative exchange differences on foreign operations in other comprehensive income should be reclassified to profit or loss only on disposal of the net investment, and (c) exchange differences on liabilities in participating currencies should not be included in related assets. The interpretation became effective in June 1998.

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    SIC-7 provides guidance on accounting for the introduction of the Euro currency. It states that the requirements of IAS 21 regarding foreign currency translation should be strictly applied to the changeover to the Euro. This means that (a) foreign currency monetary assets and liabilities should continue to be translated at the closing rate, (b) cumulative exchange differences on foreign operations in other comprehensive income should be reclassified to profit or loss only on disposal of the net investment, and (c) exchange differences on liabilities in participating currencies should not be included in related assets. The interpretation became effective in June 1998.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    31 views4 pages

    Introduction of The Euro: SIC Interpretation 7

    Uploaded by

    Rolando G. Cua Jr.
    SIC-7 provides guidance on accounting for the introduction of the Euro currency. It states that the requirements of IAS 21 regarding foreign currency translation should be strictly applied to the changeover to the Euro. This means that (a) foreign currency monetary assets and liabilities should continue to be translated at the closing rate, (b) cumulative exchange differences on foreign operations in other comprehensive income should be reclassified to profit or loss only on disposal of the net investment, and (c) exchange differences on liabilities in participating currencies should not be included in related assets. The interpretation became effective in June 1998.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    SIC-7

    SIC Interpretation 7

    Introduction of the Euro


    In April 2001 the International Accounting Standards Board adopted SIC-7 Introduction of the
    Euro, which had originally been issued by the Standing Interpretations Committee of the
    International Accounting Standards Committee in May 1998.
    Other IFRSs have made minor consequential amendments to SIC-7. These include IAS 21 The
    Effects of Changes in Foreign Exchange Rates (as revised in December 2003) and IAS 1 Presentation
    of Financial Statements (as revised in September 2007).

    姝 IFRS Foundation A1315


    SIC-7

    SIC Interpretation 7 Introduction of the Euro (SIC-7) is set out in paragraphs 3 and 4. SIC-7 is
    accompanied by a Basis for Conclusions. The scope and authority of Interpretations are
    set out in paragraphs 2 and 7–16 of the Preface to International Financial Reporting Standards.

    FOR THE BASIS FOR CONCLUSIONS ON SIC-7 SEE PART B OF THIS EDITION

    A1316 姝 IFRS Foundation


    SIC-7

    SIC Interpretation 7
    Introduction of the Euro

    References

    ● IAS 1 Presentation of Financial Statements (as revised in 2007)


    ● IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
    ● IAS 10 Events after the Reporting Period
    ● IAS 21 The Effects of Changes in Foreign Exchange Rates (as revised in 2003)
    ● IAS 27 Consolidated and Separate Financial Statements (as amended in 2008)

    Issue

    1 From 1 January 1999, the effective start of Economic and Monetary Union (EMU),
    the euro will become a currency in its own right and the conversion rates
    between the euro and the participating national currencies will be irrevocably
    fixed, ie the risk of subsequent exchange differences related to these currencies
    is eliminated from this date on.

    2 The issue is the application of IAS 21 to the changeover from the national
    currencies of participating Member States of the European Union to the euro
    (‘the changeover’).

    Consensus

    3 The requirements of IAS 21 regarding the translation of foreign currency


    transactions and financial statements of foreign operations should be strictly
    applied to the changeover. The same rationale applies to the fixing of exchange
    rates when countries join EMU at later stages.

    4 This means that, in particular:


    (a) foreign currency monetary assets and liabilities resulting from
    transactions shall continue to be translated into the functional currency
    at the closing rate. Any resultant exchange differences shall be
    recognised as income or expense immediately, except that an entity shall
    continue to apply its existing accounting policy for exchange gains and
    losses related to hedges of the currency risk of a forecast transaction;
    (b) cumulative exchange differences relating to the translation of financial
    statements of foreign operations, recognised in other comprehensive
    income, shall be accumulated in equity and shall be reclassified from
    equity to profit or loss only on the disposal or partial disposal of the net
    investment in the foreign operation; and
    (c) exchange differences resulting from the translation of liabilities
    denominated in participating currencies shall not be included in the
    carrying amount of related assets.

    姝 IFRS Foundation A1317


    SIC-7

    Date of consensus

    October 1997

    Effective date

    This Interpretation becomes effective on 1 June 1998. Changes in accounting policies shall
    be accounted for according to the requirements of IAS 8.

    IAS 1 (as revised in 2007) amended the terminology used throughout IFRSs. In addition it
    amended paragraph 4. An entity shall apply those amendments for annual periods
    beginning on or after 1 January 2009. If an entity applies IAS 1 (revised 2007) for an earlier
    period, the amendments shall be applied for that earlier period.

    IAS 27 (as amended in 2008) amended paragraph 4(b). An entity shall apply that
    amendment for annual periods beginning on or after 1 July 2009. If an entity applies IAS 27
    (amended 2008) for an earlier period, the amendment shall be applied for that earlier
    period.

    A1318 姝 IFRS Foundation

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