Under the relevant Accounting Standards (IAS 21) foreign currency monetary items are treated differently to foreign currency non-monetary items. The essential feature of a monetary item is the right to receive or an obligation to deliver a fixed or determinable amount of units of currency. A non-mo0netary items does not have this right.
Examples of monetary items:
- Trade receivables and payables
- Cash dividends recognized as a liability
- Investments in debt securities
- Deferred taxes
- Pension and other employee benefits to be paid in cash
- Provisions that are to be settled in cash
Examples of non-monetary items:
- Prepaid amounts for goods or services
- Deferred income
- Investments in equity instruments
- Inventories and other fixed assets
- Goodwill, patents, trademarks and other intangible assets
It should be noted that investments in equity instruments are regarded as non-monetary items.