Introduction

Standards of Generally Accepted Municipal Accounting Practice (GAMAP)

The Accounting Standards Board (Board) is required in terms of the Public Finance Management Act, Act No. 1 of 1999, as amended (PFMA), to determine generally recognised accounting practice referred to as Standards of Generally Recognised Accounting Practice (GRAP).

The Board must determine GRAP for:

The above are collectively referred to as "entities" Standards of GRAP.

The Board considers that the Standards of GAMAP constitute GRAP for municipalities.

GAMAP is an interim solution until such time as it is replaced by a Standard of GRAP.

Any limitation of the applicability of specific Standards is made clear in those Standards.

The Standard of GAMAP on The Effects of Changes in Foreign Exchange Rates is set out in paragraphs .01 - .16. All paragraphs in this Standard have equal authority. The authority of appendices is dealt with in the preamble to each appendix. This Standard should be read in the context of its objective, the Preface to Standards of GRAP, the Preface to Standards of GAMAP and the framework for the Preparation and Presentation of Financial Statements.

Reference may be made here to a Standards of GRAP that has not been issued at the time of issue of this Standard. This is done to avoid having to change the Standards already issued when a later Standard is subsequently issued. Paragraph .12 of the Standard of GRAP on Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies in the absence of explicit guidance.

Objective

An entity may have transactions in foreign currencies. In order to include foreign currency transactions in the financial statements of an entity, transactions must be expressed in the entity’s reporting currency.

The principal issues in accounting for foreign currency transactions are to decide which exchange rate to use and how to recognise the financial effect of changes in exchange rates in the financial statements.

Scope

Definitions

Accrual basis means a basis of accounting under which transactions and other events are recognised when they occur (and not only when cash or its equivalent is received or paid). Therefore, the transactions and events are recorded in the accounting records and recognised in the financial statements of the periods to which they relate. The elements recognized under accrual accounting are assets, liabilities, net assets, revenue and expenses.

Cash flows are inflows and outflows of cash and cash equivalents.

Closing rate is the spot exchange rate at the reporting date.

Exchange difference is the difference resulting from translating a given number of units of one currency into another currency at different exchange rates.

Exchange rate is the ratio for exchange of two currencies.

Expenses are decreases in economic benefits or service potential during the reporting period in the form of outflows or consumption of assets or incurrences of liabilities that result in decreases in net assets, other than those relating to distributions to owners.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

Foreign currency is a currency other than the functional currency of an entity.

Monetary Items are money held and assets and liabilities to be received or paid in fixed or determinable amounts of money.

Transaction date is the date upon which the entity is irrevocably committed to the transaction.

Reporting currency is the currency used in presenting the financial statements.

Reporting date means the date of the last day of the reporting period to which the financial statements relate.

Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets, other than increases relating to contributions from owners.

Spot rate is the exchange rate at the date of the transaction.

Initial recognition

Reporting at subsequent reporting dates

Recognition of exchange differences

Allowed alternative treatment

Disclosure

Effective date