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This is an exceptional case. I think I would take all exchange differences arising from the devaluation to an extraordinary items account in the P & L and report them separately at year-end as extraordinary items because they are not a normal part of your trading activity. Under IFRS you should then also disclose the nature an amount of these extraordinary items in the Notes to the Financial Statements. This is best practice.
This is a quote from the IFRS Disclosure Checklist:-
EXTRAORDINARY ITEMS
The following should be disclosed separately for extraordinary items:
a) the nature and amount of each item; and
b) the tax expense/income relating to extraordinary it ems recognised during the period.
OTHER UNUSUAL ITEMS
Where items of income and expense within profit or loss from ordinary activities are of
such size, nature or incidence that their disclosure is relevant to explain the performance
of the enterprise for the period, the nature and amount of such items should be disclosed
separately.
Hope this helps.
Rgds, Roy
Roy Brookes AFA, FInstBA,
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| | | ---------------Original Message---------------
From: aluciche
Sent: Tuesday, February 15, 2011 9:34 PM
Subject: Foreign currency reversal documents
Roy, you are right your logical and common sense says that, but I have a case for Venezuela last year (2010) where there was a hard devaluation and my client did a Revenue accrual at end of year 2009 auto reversal (ZA) in local currency when the exchange rate was VEF 2.15 per USD, this accrual was automatically reversed in January 2010 based on the exchange rate VEF 2.15 instead of new exchange rate for January 2010 of VEF 4.30 per USD. I am talking on VEF 2,150 equivalent to USD 1,000, the accrual posted in December was cleared in January 2010 such as you are meaning without trace because the reversal was posted based on original exchange rate, but what happens if the accrual need be posted again in January 2010 due to the invoice was not issued to the customer, the accrual will be for VEF 2,150 equivalent to USD 500 (based on new exchange rate VEF 4.30 per USD), then P&L will show for January 2010 a Revenue in debit for $ 500 (debit for $ 1,000 for the auto reversal of the entry posted in December 2009 and credit for $ 500 for the re-accrual posted using the new exchange rate) obviously from Marketing people they will be disagree to report Revenues in debit for January.
Regards,
Anibal Luciche
713-459-1524
832-644-5561
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