What is meant by foreign currency transaction?



According to paragraph 20 of IAS 21 – the effects of changes in foreign exchange rates, a foreign currency transaction is the transaction that is denominated or requires settlement in a foreign currency , including transactions arising when an entity;

  • buys and sells goods or services whose price is denominated in the foreign currency.
  • borrows or lends funds when the amount payable or receivable are denominated in foreign currency; or



  • otherwise acquires or disposes of assets or incur or settles liabilities, denominated in a foreign currency.

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