SIC-7 — Introduction of the Euro
- IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
- IAS 10 Events After the Balance Sheet Date
- IAS 21 The Effects of Changes in Foreign Exchange Rates
- Issued May 1998.
- Effective date: 1 June 1998.
- Revised December 2003, effective 1 January 2005, as part of the IASB's Improvements project. The summary below reflects those revisions.
Summary of SIC-7
This Interpretation addresses how the introduction of the Euro, resulting from the European Economic and Monetary Union (EMU), affects the application of IAS 21 The Effects of Changes in Foreign Exchange Rates. SIC-7 states that the requirements of IAS 21 should be strictly applied when a country joins the EU's Economic and Monetary Union.
- foreign currency monetary assets and liabilities resulting from transactions continue to be translated into the functional currency at the closing rate. Any resulting exchange differences are recognised as income or expense immediately, except that an entity continues to apply its existing accounting policy for exchange gains and losses related to hedges of the currency risk of a forecast transaction
- cumulative exchange differences relating to the translation of financial statements of foreign operations continue to be classified as equity and are recognised as income or expense only on the disposal of the net investment in the foreign operation
- exchange differences resulting from translating liabilities denominated in participating currencies are not included in the carrying amount of related assets.