The following are the items of Statement of Financial Position or Balance Sheet. They are described shortly.
• Assets. Assets should primarily be classified as monetary or non-monetary assets. Monetary assets are translated at the current rate existing at the end of the reporting period. With a non-monetary asset, the exchange rate used is that current at the date at which the recorded amount for the asset has been entered into the accounts. Therefore, for non-monetary assets recorded at historical cost, the rates used are those existing when the historical cost was recorded. For non-monetary assets that have been revalued, whether upwards or downwards, the exchange rates used will relate to the dates of revaluation.
• Liabilities. The principles enunciated for assets apply also for liabilities. The liabilities are classified as monetary and non-monetary and, for the latter; it is the date of valuation that is vital.
• Equity. In selecting the correct exchange rate two factors are important. First, equity existing at the date of acquisition or investment is distinguished from post-acquisition equity. Second, movements in other reserves and retained earnings constituting transfers within or internal to equity are treated in a different way from other reserves.
• Share capital. If on hand at acquisition or created by investment, the capital is converted at the rate existing at acquisition or investment. If the capital arises as the result of a transfer from another equity account, such as a bonus dividend, the rate is that current at the date the amounts transferred were originally recognized in equity.
• Other reserves. If on hand at acquisition, the reserves are converted at the rate existing at acquisition. If the reserves are post-acquisition and result from internal transfers, the rate used is that at the date the amounts transferred were originally recognized in equity. If the reserves are post-acquisition and not created from internal transfers, the rate used is that current at the date the reserves are first recognized in the accounts.
• Retained earnings. If on hand at acquisition, the retained earnings are converted at the rate of exchange current at the acquisition date. Any dividends paid from pre-acquisition profits are also converted at this rate. Post-acquisition profits are carried forward balances from translation of previous periods’ statements of profit or loss and other comprehensive income.
