Introduction of the Euro (SIC-07)
An Interpretation of IAS 21, The Effects of Changes in Foreign Exchange Rates
- Issued May 1998.
- Effective date: 1 June 1998.
This Interpretation addresses how the introduction of the Euro, resulting from the European Economic and Monetary Union (EMU), will affect the application of IAS 21, The Effects of Changes in Foreign Exchange Rates. SIC 7 states that the requirements of IAS 21 should be strictly applied. This means that monetary assets and liabilities should continue to be translated at the spot rate. Where an enterprise has an existing accounting policy of deferring exchange gains and losses related to anticipatory hedges, an enterprise should continue to account for such deferred exchange gains and losses notwithstanding the changeover to the euro.
Cumulative differences classified as equity relating to foreign entities should continue to be recognised as income or expenses only on the disposal of the foreign entity. The allowed alternative treatment of IAS 21.21 regarding exchange differences resulting from severe devaluations does not apply to currencies participating in EMU.
Note: Please note that these summaries are only for reference purposes and are not a substitute for the entire SIC. Kindly read the whole text of SIC before consulting these summaries.
Summaries are courtesy of Deloitte.
More SIC Summaries
- SIC-01 - Consistency - Different Cost Formulas for Inventories
- SIC-02 - Consistency - Capitalisation of Borrowing Costs
- SIC-03 - Elimination of Unrealised Profits and Losses on Transactions with Associates
- SIC-05 - Classification of Financial Instruments - Contingent Settlement Provisions
- SIC-06 - Costs of Modifying Existing Software
- SIC-07 - Introduction of the Euro
- SIC-08 - First-Time Application of IASs as the Primary Basis of Accounting
- SIC-09 - Business Combinations - Classification either as Acquisitions or Unitings of Interests
- SIC-10 - Government Assistance - No Specific Relation to Operating Activities
- SIC-11 - Foreign Exchange - Capitalisation of Losses Resulting from Severe Currency Devaluations
- SIC-12 - Consolidation - Special Purpose Entities
- SIC-13 - Jointly Controlled Entities - Non-Monetary Contributions by Venturers
- SIC-14 - Property, Plant and Equipment - Compensation for the Impairment or Loss of Items
- SIC-15 - Operating Leases - Incentives
- SIC-16 - Share Capital - Reacquired Own Equity Instruments (Treasury Shares)
- SIC-17 - Equity - Costs of an Equity Transaction
- SIC-18 - Consistency - Alternative Methods
- SIC-19 - Reporting Currency - Measurement and Presentation of Financial Statements Under IAS 21 and IAS 29
- SIC-20 - Equity Accounting Method - Recognition of Losses
- SIC-21 - Income Taxes - Recovery of Revalued Non-Depreciable Assets
- SIC-22 - Business Combinations - Subsequent Adjustment of Fair Values and Goodwill Initially Reported
- SIC-23 - Property, Plant and Equipment - Major Inspection or Overhaul Costs
- SIC-24 - Earnings Per Share - Financial Instruments that May Be Settled in Shares
- SIC-25 - Income Taxes - Changes in the Tax Status of an Enterprise or its Shareholders
- SIC-27 - Evaluating the Substance of Transactions in the Legal Form of a Lease
- SIC-28 - Business Combinations - 'Date of Exchange' and Fair Value of Equity Instruments
- SIC-29 - Disclosure – Service Concession Arrangements
- SIC-30 - Reporting Currency – Translation from Measurement Currency to Presentation Currency
- SIC-31 - Revenue – Barter Transactions Involving Advertising Services
- SIC-32 - Intangible Assets – Website Costs
- SIC-33 - Consolidation and Equity Method - Potential Voting Rights and Allocation of Ownership Interests