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FRS 21 The Effects of Changes in Foreign Exchange Rates requires different translation rules for...

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Accounting

FRS 21 The Effects of Changes in Foreign Exchange Rates requires different translation rules for assets and liabilities arising from foreign currency transactions and assets and liabilities of foreign operations.

Paragraph 23 of FRS 21 (FRS 21.23), which deals with accounting of assets and liabilities arising from foreign currency transactions, provides that at each balance sheet date, foreign currency monetary items should be translated using the closing rate, non-monetary items that are measured in terms of historical cost in a foreign currency should be translated using the exchange rate at the date of the transaction, and non-monetary items that are measured at fair value in a foreign currency should be translated using the exchange rates at the date when the fair value was determined.

Paragraph 39 of FRS 21 (FRS 21.39), which deals with translation of assets and liabilities of foreign operations, provides that all the assets and liabilities should be translated at the closing rate.

Required: Critique the requirements of FRS 21.23 and FRS 21.39 (10 marks)

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