Under the relevant Accounting Standards (IAS 21) foreign currency monetary items are treated differently to foreign currency non-monetary items. The essential feature of a monetary item is the right to receive or an obligation to deliver a fixed or determinable amount of units of currency. A non-mo0netary items does not have this right.
Examples of monetary items:
- Trade receivables and payables
- Cash dividends recognized as a liability
- Investments in debt securities
- Deferred taxes
- Pension and other employee benefits to be paid in cash
- Provisions that are to be settled in cash
Examples of non-monetary items:
- Prepaid amounts for goods or services
- Deferred income
- Investments in equity instruments
- Inventories and other fixed assets
- Goodwill, patents, trademarks and other intangible assets
It should be noted that investments in equity instruments are regarded as non-monetary items.
Please enrol me for the free email course
on Basics of Accounting for Financial Instruments
Join our mailing list to receive the latest news and updates from our team.