한국채택 국제회계기준과 외화 환산 관련 회계처리에 관한 연구

Accounting for the Effects of Changes in Foreign Exchange Rates

The aim of this paper is to evaluate the accounting for the effects of changes in foreign exchange rates. Korean GAAP and K-IFRS are similar standards in that they both cover translation of transactions and financial statements of foreign currencies or foreign operation; however, the way in which approach these translation can differ significantly. Korean GAAP have treated translation of transactions and financial statements of foreign currencies and foreign operation primarily based on concept of monetary items and non-monetary items. Unlike Korean GAAP, one of the fundamental requirements of K-IFRS is that when a reporting entity prepares financial statements each individual entity included in those statements must determine its own functional currency and measure its own results and financial position in that currency. K-IFRS refers to functional currency, which is the currency of the primary economic environment in which the entity operates. The functional currency of an entity should reflect the underlying transactions, events and condition that are relevant to the entity. Furthermore, another important issue under K-IFRS is recognition of exchange differences. Under K-IFRS, exchange differences from long-term foreign currency monetary items should be recognised profit or loss for the period. This K-IFRS standard related to foreign exchange transactions does not appropriately reflect the economic substances of open economies which has significant foreign currency trades, especially under the environment of abnormally volatile foreign exchange rates. Key accounting numbers of companies which has a large amount of foreign currency transactions, are affected mainly by a dramatic fluctuation in foreign exchange rates, but not by operating performance. Many emerging market countries are suffering from abnormally large devaluation on their currencies, but abnormally large fluctuations in foreign exchange rates later stabilizes in a short period. Thus, exchange rate for long term foreign currency denominated assets and liabilities at the time of redemption or settlement becomes much different from the rate at the date of the balance. An airline business which normally has a large amount of foreign debt, is a good example of how current accounting rules may distort true financial numbers. Therefore, exchange differences from long term foreign currency monetary items should be recognised in other comprehensive income.