Conversion in Lease

IAS 21, Effects of Changes in Foreign Exchange Rates

IAS 21, Effects of Changes in Foreign Exchange Rates provides guidance on the recognition of foreign currency transactions and foreign operations in the financial statements and how to convert financial statements in the consolidated currency. An entity shall determine its functional currency (for each of its institutions, if necessary) based on the primary economic environment in which it operates and in which it generally accounts for such foreign transactions by applying the spot exchange rate between this functional currency and the foreign currency at the date of the transaction.

Transactions in foreign currency

A foreign currency transaction must be recorded initially at the exchange rate in effect on the transaction date (the use of the average rate is permitted to the extent that it is a reasonable approximation of the actual price).

At each subsequent closing:

• monetary items in foreign currency must be calculated at the closing rate;
• non-monetary items valued at historical cost must be calculated at the exchange rate on the transaction date;
•     non-monetary items measured at fair value must be presented at the exchange rate on the date on which the fair value was determined.

Foreign exchange variation resulting from the settlement of monetary items or the conversion of monetary items using rates other than those to which they were converted on initial entry or in previous financial statements should be recognized in profit or loss for the period, with one exception. Foreign exchange variaition on a monetary item that is part of a reporting entity's net investment in a foreign operation that is recognized in the consolidated financial statements that include the foreign operation, in the other elements of the overall result constitute this exception; they will then be recognized in profit or loss on the disposal of the net investment.

Change from functional currency to presentation currency

The results and financial situation of an entity whose functional currency is not the currency of a hyperinflationary economy are converted into another presentation currency, according to the following procedures:

• Assets and liabilities in each statement of financial position presented (including comparative) are translated at the closing rate on the date of each statement. This includes any goodwill arising from the acquisition of a foreign operation and any adjustment to the fair value of the carrying amount of assets and liabilities arising from the acquisition of that foreign operation, which are accounted for as foreign operations assets or liabilities of the foreign operation ;
• the incomes and expenses of each income statement presented (including for comparative purposes) are translated at the exchange rate prevailing on the dates of the transactions;
• all resulting exchange differences are recognized in other comprehensive income.

Conversion in the functional currency of the Lessee

Following exchange rates :

	TM	TC
31/12/2016	£    0,856180	0,844410
30/06/2017	£    0,826500	0,790490
31/12/2017	£    0,733950	0,725950
31/12/2016	$    0,948497	0,948677
30/06/2017	$    0,890551	0,900739
31/12/2017	$    0,919371	0,918527
31/12/2016	€    1	1
30/06/2017	€    1	1
31/12/2017	€    1	1

Non-monetary Items

Non-monetary assets and liabilities (gross value, asset amortization, costs of dismantling) are converted at historical rates prevailing at the time the transactions that gave rise to these items were made.

Variations of the element are converted at the average rate of the period. No exchange rate effect is calculated on the item. The balance is therefore maintained at its historic rate.

Amounts in transaction currency ($)

Amounts in Functional currency (£)

Note: The increase in gross value appears in the period of June 2017.

1. Calculation of the variation of the gross value in £ :

GV increase (£) = GV incease ($) x TM¹ of $ in 06.2017 / TM of £ in 06.2017

2 743 = 2 956 x 0,8265 / 0,8905

Monetary Items

Monetary assets and liabilities are converted at the closing rates.
Variations of the element are converted at the average rate of the period. Two exchange effects are generated:

• one applicable to the opening balance in relation to the closing rate of the previous period (FC04 - Foreign exchange effect on opening)
• the other is applicable to variations to "wedge" them at the closing rate (FC05 - Average exchange rate effect)
• The balance is therefore converted at the closing rate.

Amounts in transaction currency ($)

Amounts in functional currency (£)

The increase of the Non-Current Debt appears in the period of June 2017.

1. Calculation of the variation of the non-current debt in £:

   NC debt increase (£) = NC debt increase($) x TM² of $ in 12.2017 / TM of £ in 12.2017

2 360 = 2 956 x 0,73395 / 0,91937

1 TM : Taux moyen

2 TM : Average Rate

2. Calculation of the exchange rate effect related to the opening rate on opening balances in £:

   FC04 – Exchange rate effect on opening = (NC Debt opening balance ($) x TC³ of £ in 12.2017 / TC of $ in 12.2017) - (NC Debt opening balace ($) x TC of £ in 12.2016 / TC of $ in 12.2016)

10 = (-105 x 0,72595 / 0,91853) – (-105 x 0,84441 / 0,94868)

1. Calculation of the exchange rate effect related to the average rate on the variation in

   £ :FC05 – exchange rate effect on average rate = (NC Debt variation ($) x TC of £ in 12.2017 / TC of $ in 12.2017) - (NC Debt variation ($) x TM of £ in 12.2017 / TM of $ in 12.2017)

NC Debt variations ($) = 2956 – 2701 = 255

-2 = (255 x 0,72595 / 0,91853) – (255 x 0,73395 / 0,91937)

Exchange rate Impact

The counterpart of the foreign exchange effects stated above is recorded in unrealized foreign exchange earnings.

Amounts in functional currency (£)

1. Calculation of the unrealized foreign exchange result

   Unrealized foreign exchange result = - FC04 – FC05 – Foreign Exchange Effect on GV
   1 493 = -(10 – 1191) – (-2 +74) – (-384)

   with :

   Foreign Exchange Effect on (£) = (GV increase ($) x TM4 of $ in 12.2017 / TM of £ in 12.2017) – (GV increase ($) x TM of $ in 06.2017 / TM of £ in 06.2017)

   -384 = (2 956 x 0,73395 / 0,91937) – (2 956 x 0,8265 / 0,8905)

3 T : Closing Rate

4 TM : Average Rate

Conversion in the consolidation Currency

The consolidation currency is defined in the MasterData.

Monetary and Non Monetary Items

Amounts converted into the functional currency of the entity are then converted using the closing rate method.

Variations of the element are converted at the average rate of the period. Two exchange effects are generated:

• one applicable to the opening balance in relation to the closing rate of the previous period (FC04 - Currency effect on opening)
• the other applicable to the variations for the "wedge" at the closing rate (FC05 - Effect of exchange rate on average rate)

The balance is therefore converted at the closing rate.

Amounts in functional currency (£)

Amounts in consolidated currency (€)

1. Calculation of the Current Debt variation in € :

   C Debt Revaluation (£) = C Debt Revaluation (£) x TM5 of € in 12.2017 / TM of £ in 12.2017
   -12 987 = -9532 x 1 / 0,73395

2. Calculation of the exchange rate effect related to the opening rate on the opening balances of the current debt in €:

5 TM : Average Rate

Caution: Flow « FC04 – currency effect on opening » includes :
FC04 variation ; itself converted at the average rate, (like all the other variations of the period) Exchange rate effect applied on the opening balance. (a)

FC04 – currency effect on opening = (FC04 – currency effect on openeing in £ x TM of € in 12.2017 / TM of £ in 12.2017 ) + (C Debt opening balance (£) x TC6 of € in 12.2017 / TC of £ in 12.2017) - (C Debt opening balance(£) x TC of € in 12.2016 / TC of £ in 12.2016)

431 = (-1191 x 1 / 0,73395) + (10 628 x 1 / 0,72595) – (10 628 x 1 / 0,84441)

3. Calculation of the exchange rate effect related to the average rate on the variations in
   € :

Caution: Flow « FC05 – effect of exchange rate on average rate » includes :
The variation FC05 itself converted at the average rate (like all the other variations of the period Exchange rate effect on the variations. (b)

FC05 – effect of exchange rate on average rate = (FC05 – effect of exchange rate on average rate in £ x TM of € in 12.2017 / TM of £ in 12.2017 ) + (C Debt variations (£) x TC of € in 12.2017 / TC of £ in 12.2017) - (C Debt variations (£) x TM of € in 12.2017 / TM of £ in 12.2017)
C Debt Variations (£) = - 9532 – 1191 + 74 + 2157 = - 8493
-27 = (74 x 1 / 0,73395) + (-8493 x 1 / 0,72595) – (-8493 x 1 / 0,73395)

6 TC : Closing Rate

Exchange Rate Conversion Reserve

The counterpart of these currency effects is recorded as a exchange rate conversion reserve.

Amounts in functional currency (£)

Amounts in consolidation currency (€)

1. Calculation of Flow « FC04 – Currency effect on opening » of the exchange rate conversion reserve :
   FC04 – currency effect on the opening = - Exchange rate effect in FC04(a) on the dette NC debt – Exchange rate effect in FC04(a) on the C debt – Other FC04
   Part of the exchange rate effect on the FC04 of the current debt: 2054 = (10 628 x 1 / 0,72595) – (10 628 x 1 / 0,84441)
   Part of the exchange rate effect on the FC04 of the non-current debt : -18 = (-93 x 1 / 0,72595) – (-93 x 1 / 0,84441)
   438 = - 2054 - (-18) + 4551 - 1935 - 142

2. Calculation of flow « FC05 – Effect of exchange rate on average rate » of the exchange rate conversion reserve:
   FC05 – Effect of exchange rate on average rate = - Exchange rate effect in FC05(b) on NC Debt – Exchange rate effect Effect in FC05(b) on C Debt – Other FC05