Section PS 2601 - Foreign Currency Translation
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Effective date: |
(i) Government organizations – April 1, 2012; and (ii) Governments – April 1, 2021. Earlier adoption is permitted. |
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Published by the PSAB: |
June 2011 |
Overview
This Section establishes standards on how to account for and report transactions that are denominated in a foreign currency in government financial statements.
Under PS 2601 Foreign currency translation the government’s functional currency is presumed to be the Canadian dollar. Transactions made in a currency other than Canadian dollars are translated applying the exchange rate in effect on the date of the transaction. Monetary items denominated in a foreign currency are translated at each subsequent reporting date to reflect the current exchange rate.
For fiscal periods beginning prior to April 1, 2019 for governments and prior to April 1, 2012 for government organizations, exchange gains and losses are recognized in the statement of operations except in the case of long-term monetary items. For such items, the gain or loss is deferred and amortized to revenue/expense over the remaining life of the item. The unamortized foreign exchange gain or loss is separately reported on the statement of financial position as an offset or addition to the related long-term monetary item.
History of Section PS 2601
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Date |
Development |
Comments |
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June 2011 |
New Section |
This Section revises and replaces Section PS 2600 Foreign currency translation. It is effective for (i) government organizations for fiscal years beginning on or after April 1, 2012; and (ii) governments for fiscal years beginning on or after April 1, 2015. Earlier adoption is permitted. Sections PS 1201 Financial statement presentation, and PS 3450 Financial instruments, are to be adopted at the same time. |
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May 2012 |
Revised transitional provisions |
The transitional provisions for this Section have been amended to clarify their application to hedging instruments for government organizations transitioning from the standards in Part V of the Handbook – Accounting. A new transitional provision has been added that applies to government organizations transitioning from the standards in Part V with self-sustaining foreign operations. |
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August 2013 |
This Section has been amended to clarify the effective dates for governments and government organizations. |
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March 2014 |
The transitional provisions have been amended to extend the effective date for governments by one year to fiscal years beginning on or after April 1, 2016. Earlier adoption is permitted. |
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June 2015 |
The transitional provisions have been amended to extend the effective date for governments to three years to fiscal years beginning on or after April 1, 2019. Earlier adoption is permitted. |
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March 2018 |
The PSAB (i) concluded that the PSA Handbook sections on foreign currency and financial instruments were appropriate for public sector entities, including governments and (ii) approved an extension of the effective date for governments of Sections PS 3450, Financial Instruments, and PS 2601, Foreign Currency Translation, to fiscal years beginning on or after April 1, 2021. Earlier adoption is permitted. |
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| October 2020 |
The amendments permit the federal government to present exchange gains and losses related to its foreign reserves, including the associated derivatives, directly in the statement of operations. |
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| November 2020 |
Amendments to effective date for governments |
The transitional provisions have been amended to extend the effective for governments by one further year to fiscal years beginning on or after April 1, 2022. Earlier adoption is permitted. |
| April 2021 |
Narrow-scope amendments to financial instruments – Phase III |
Phase III consisted of two proposals, as follows: (i) a proposal to clarify the presentation of derivatives, namely that public sector entities may present the remeasurement impact of derivatives separately on the statement of change in net debt; and (ii) a proposal to allow all public sector entities to make an accounting policy election to recognize exchange gains and losses, including the exchange gain or loss component of changes in fair value, directly in the statement of operations. These amendments are effective for fiscal years beginning on or after April 1, 2022, with earlier application permitted. Transitional provisions have also been introduced in Section PS 2601. |
Note: The above summary does not include details of consequential amendments made as the result of other projects.
Amendments under consideration
- None