Foreign Currency Translation according to IAS 21 and IAS 39 in Consolidated Financial Statements

Inhaltsverzeichnis (Table of Contents)

• Introduction
• Management of Foreign Currency Risks
  • Currency Exposures
    • General Remarks
    • Translation Exposure
    • Transaction Exposure
    • Economic Exposure
  • Instruments of Foreign Currency Risk Management
    • General Remarks
    • Managing Translation Exposure
    • Managing Transaction Exposure
    • Managing Economic Exposure
• Foreign Currency Translation according to IAS 21(revised 2004)
  • General Remarks
  • The Concept of the Functional Currency
    • Background
    • Factors determining the Functional Currency
  • Translating Foreign Currency Transactions into the Functional Currency
    • Monetary Items
    • Non-Monetary Items
    • Net Investments in Foreign Operations
    • Recognition of Exchange Differences
    • Accounting for Hedges of a net Investment in a Foreign Operation
  • The Presentation Currency
    • Allowed Presentation Currencies
    • Translation from the Functional Currency into the Presentation Currency
    • Translation of Foreign Operations
    • Recognition of Exchange Differences
      • Exchange Differences in Separate Financials Statements
      • Exchange Differences in Consolidated Financial Statements using a Foreign Currency Hedge
      • Exchange Differences arising from Intragroup Monetary Items
• Foreign Currency Hedge Accounting according to IAS 39 in multinational groups
  • Introducing Hedge Accounting under IFRS
    • Overview
    • Derivative Financial Instruments
    • Hedges for Foreign Currency Risk
    • Qualifying Instruments for Hedge Accounting
    • Effectiveness Criteria
    • Hedging of Net Positions
  • Accounting for Fair Value Hedges
  • Accounting for Cash Flow Hedges
  • Exposure Draft ED-7 "Cash Flow Hedge Accounting of Forecast Intragroup Transactions"
    • Planned Amendments of IAS 39(revised 2003)
    • Reasons for the planned Amendments of IAS 39
    • Review on the proposed Amendments
• Summaries

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This thesis aims to analyze the accounting for foreign currency translation and hedge accounting within multinational groups, specifically addressing the application of IAS 21 (revised 2004) and IAS 39 in consolidated financial statements. It explores the management of foreign currency risks, the concept of functional currency, and the recognition of exchange differences. The thesis also examines the use of hedge accounting under IFRS and the implications of intragroup foreign currency hedging strategies.

• Foreign currency translation according to IAS 21
• Hedge accounting according to IAS 39
• Management of foreign currency risks
• Intragroup foreign currency hedging strategies
• Impact of accounting standards on consolidated financial statements

Zusammenfassung der Kapitel (Chapter Summaries)

The thesis begins by introducing the management of foreign currency risks, outlining the different types of exposures (translation, transaction, and economic). It then explores the instruments available for managing these risks, including hedging strategies.

Chapter 3 delves into the complexities of foreign currency translation under IAS 21 (revised 2004). It explains the concept of functional currency and the process of translating foreign currency transactions into the functional currency. The chapter also addresses the recognition of exchange differences and the accounting for hedges of net investments in foreign operations.

Chapter 4 focuses on foreign currency hedge accounting according to IAS 39. It introduces the concept of hedge accounting under IFRS and discusses the qualifications for hedge accounting, effectiveness criteria, and accounting for fair value and cash flow hedges.

Chapter 5 provides a summary of the key findings and conclusions of the thesis.

Schlüsselwörter (Keywords)

The main keywords of this thesis include: foreign currency translation, IAS 21, IAS 39, hedge accounting, functional currency, presentation currency, exchange differences, intragroup foreign currency hedging, consolidated financial statements, multinational groups, IFRS.