Compare and Contrast Accounting for Foreign Currency Transactions and Hedges

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The Answer is ASPE and IFRS are similar in their methods of accounting for foreign exchange transactions and balances.Monetary items are translated using the spot rate at the date of the SFP,and gains and losses are reported in net earnings.For non-monetary items carried at historical cost,these are translated at the historical exchange rate.
For non-monetary assets carried at fair value,IFRS uses the exchange rate on the date the fair value was determined.Under ASPE,the exchange rate used is the spot rate on the balance sheet date.In both cases,any exchange gains and losses are reported in net earnings.
Hedging under ASPE is more simplified than under IFRS.In both cases,hedging is optional and requires documentation.(Documentation under ASPE is less onerous that under IFRS. )IFRS requires that hedges be classified as fair value hedges or cash flow hedges.The gains and losses on fair value hedges are reported in earnings.Gains and losses on cash flows hedges are reported in OCI until the related anticipated transaction takes place,at which time the gains and losses are either transferred to earnings or included in the carrying cost of the asset.For both fair value hedges and cash flow hedges,the derivatives are fair valued at each reporting period.Forward contracts,futures contracts,options and swaps can all qualify as hedging instruments under IFRS.
Under ASPE,hedge accounting can only be used for anticipated transactions.Derivatives that are not designated as hedges must be fair valued at each reporting period and any gains and losses are reported in net earnings.Only forward contracts can be used to hedge foreign currency transactions.If the forward contract is designated as a hedge,it is not recognized until maturity.At maturity,the gain or loss is adjusted to the carrying value of the hedged item.
Disclosure is required under both ASPE and IFRS,although ASPE disclosure is less extensive.

Compare and Contrast Accounting for Foreign Currency Transactions and Hedges

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Compare and Contrast Accounting for Foreign Currency Transactions and Hedges

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