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Finances - AccountingINTRODUCTION OF THE EUROStănculescu Mimi-Florina Ph. D StudentAcademy of Economic StudiesFaculty of AccountingAbstract: SIC 7 addresses how the introduction of the Euro, resultingfrom the European Economic and Monetary Union (EMU), affects theapplication of IAS 21. SIC 7 states that the requirements of IAS 21 shouldbe strictly applied when a country joins the EU's Economic and MonetaryUnion. The effects of the euro depends on the particular circumstances ofa society and its environment.JEL classification: G32, M41Key words: critical: SIC 7; Monetary Union; the changeover creative thinking; problemsolving; accounting researches1. INTRODUCTIONThis Interpretation deals with how it performs this introducing the euroresulting from the monetary union, and the way that the single currency affect theapplication of IAS 21 The Effects of Changes courses exchange.IAS 7 states that the requirements of IAS 21 should be strictly applied when acountry joins the EU Economic and Monetary Union. From January 1, 1999, Economicand Monetary Union (EMU) requires euro to be an independent currency and theconversion rates between the euro and currencies participating countries will beirrevocably fixed, ie, as of this date will be eliminated the risk of exchange ratedifferences.Requirements of IAS 21 in terms of conversion operations and situationsforeign financial entities, should be strictly applied in case of changing. The samereasoning goes for irrevocably fixing the exchange rates of other countries will joinEMU at later stages. This means in particular that: (A). currency monetary assets andliabilities from transactions should continue to achieve currency in which financialstatements are presented using closing exchange rates. Differences resulting from theexchange would be recognized immediately as income or expense, except related tocompanies should continue to apply the previous accounting policies that special caseof exchange rate differences related to exchange contracts rate, used to reduce risk orforeign exchange operations future commitments (protection). (B) differences incumulative currency translation related to the financial statements of foreign entities,which are part of the held by the parent, should remain classified as equity, and shouldbe recognized as income or expense to expropriate foreign entity net investment inquestion. (C) exchange differences arising on the translation of liabilities denominatedin currencies of participating countries, should not be included in the carrying amountof related assets.109
Revista Tinerilor Economişti (The Young Economists Journal)2. BASIS FOR CONCLUSIONS:Section 11 (a) of IAS 21 requires foreign currency monetary products to beaccounted for using the closing rate at balance sheet date. In accordance with paragraph15 of IAS 21, exchange differences arising from conversion of monetary items shouldbe recognized as income or expenses in the period in which they occur. Effective startof EMU by date balance does not modify the application of these requirements on theclosing date, because, in paragraph 28 of IAS 10, has no relevance to the fact that therate exchange at the balance sheet can fluctuate after the closing date balance.In paragraph 14 of IAS 21 provides that this rule does not deal accounting forhedging transactions, except very specific cases. Paragraph 42 of IAS 8, would allow achange accounting policy only when it aims at obtaining a presentation appropriateevents and transactions company. Effective start of EMU, by itself, does not justify achange in accounting policy by the company in for coverage sooner, because thechangeover does not affect the principles behind the economic base of such coverage.The changeover did not change in accounting policy, which gains and lossesfrom financial instruments designated as hedges in advance, apart and compenseza withincome and expenses in future periods.That the cumulative value of foreign exchange differences will be fixed inEMU does not justify immediate recognition as income or expense, literal wording ofparagraph 37 of IAS 21 clearly prevents this treatment.In accordance with the allowed alternative treatment in paragraph 21 of IAS 21,exchange differences arising from the strong devaluation against foreign currency, theycan be included in certain very limited circumstances regarding recognition of the assetvaloarii to which acts.Those circumstances do not apply to the participating currencies euro area sincethe devaluation hypothesis is incompatible with strong necessary stability required inthe process of accession.Therefore:• foreign currency assets and monetary liabilities arising from transactionscontinue to be translated into functional currency at the closing. Any differences inexchange results are recognized as income or expense immediately, except that anentity continues to apply its existing accounting policy for exchange gains and losses onhedges of risk rate of a forecast transaction.• cumulative exchange differences relating to the translation situations foreignfinancial operations continue to be classified as equity and are recognized as income orexpense only net investment in the economic failure of alienation and• exchange differences arising on the translation of liabilities denominated inparticipating currencies not included in the carrying amount of assets related.The effects of the euro depends on the particular circumstances of a society andits environment.Some companies do not use foreign currencies in their operations. Inconsequence, these companies were never required to perform currency translationbefore, because it was simply necessary.However, with the euro, these companies will have to translate their accounts ineuro units. This translation is not a revaluation of assets, Equity and liabilities of thesecompanies. These elements are expressed a new currency, in the same way a translationis made convenience. Translation procedure to be followed is relatively easy. It takesonly that all assets, capital and liabilities to be translated into euros using the rate fixed110
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EditorialHow to become a researcher
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