In a paper for the May issue of the journal ‘IFRS in Practice’, Alyona Kit, Manager at International Financial Reporting, FBK, FCCA, Auditor of NAFD and Member of the Self-Regulatory Organization of Auditors Association Sodruzhestvo, explores the application of paragraphs 48 and 49 of IAS 21 in borderline situations.
The author sheds light on why simply ceasing commercial operations and mothballing the business does not automatically constitute grounds for reclassifying accumulated exchange differences to profit or loss. The papers looks into the criteria that support a conclusion that a foreign operation has either been actually disposed of or its use discontinued without its legal liquidation.
‘IAS 21 links the recycling of amounts not to management's intentions, but to the fact of disposal or final discontinuation of the operation,’ the author emphasises.
To learn how to form a professional judgment under conditions of uncertainty and what disclosures are required in the financial statements, read the full paper here.
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