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7296 Points
Joined March 2019
YOUR QUERY- foreign currency monetary items should be reported using the closing rate. However, in certain circumstances, the closing rate may not reflect with reasonable accuracy the amount in reporting currency that is likely to be realised from, or required to disburse, a foreign currency monetary item at the balance sheet date, e.g., where there are restrictions on remittances or where the closing rate is unrealistic and it is not possible to effect an exchange of currencies at that rate at the balance sheet date. In such circumstances, the relevant monetary item should be reported in the reporting currency at the amount which is likely to be realised from, or required to disburse, such item at the balance sheet date;
The meaning is simple, at initial recognition all cash, receivables and payables monetary items are translated to domestic currency in which a company prepares its statements. Then at subsequent measurement, the same method is followed ie., the monetary items are revalued at every balance sheet date in their reporting currency again to see if the monetary items value increased or decreased in domestic currency.