Philippine Public Sector Accounting Standards

Philippine Public Sector Accounting Standard 4

THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES Table of ContentsPAGNumber

BACKGROUND

INTRODUCTION TO THE IPSAS 4

PHILIPPINE APPLICATION GUIDANCE TO IPSAS 4

Scope1

Effective Date2

Philippine Public Sector Accounting Standard 4THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATESBackgroundThis Philippine Public Sector Accounting Standard (PPSAS) 4 consists of International Public Sector Accounting Standard (IPSAS) 4, The Effects of Changes in Foreign Exchange Rates, and the Philippine Application Guidance (PAG) prepared to suit the Philippine public sector situation.

The IPSAS 4 was issued in May 2000 and revised in December 2006 and April 2008 by the International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC). This includes amendments resulting from IPSASs issued up to January 15, 2012.The PAG (in italics) provides supplementary guidance on the proper implementation of IPSAS 4.

Introduction to the IPSAS 4IPSAS 4 prescribes the standards in including foreign currency transactions and foreign operations in the financial statements, and translating financial statements into a presentation currency. Translation refers to the conversion of foreign currency denominated financial statements into the presentation currency (which is the Philippine peso) by using the rate at which the currencies are exchanged. However, in the Philippine public sector except Government Business Enterprises, the applicability of IPSAS 4 is limited to accounting for foreign currency transactions and the corresponding effects of changes in exchange rates.

Philippine Application Guidance to IPSAS 4Scope

PAG1. Paragraph 6 deals with the applicability of this Standard to all public sector entities other than Government Business Enterprises (GBEs). GBE is an entity that has all the following characteristics: (a) Is an entity with the power to contract in its own name; (b) Has been assigned the financial and operational authority to carry on a business; (c) Sells goods and services, in the normal course of its business, to other entities at a profit or full cost recovery; (d) Is not reliant on continuing government funding to be a going concern (other than purchases of outputs at arms length); and (e) Is controlled by a public sector entity. This standard shall be applied to all National Government Agencies (NGAs), Local Government Units (LGUs) and Government-Owned and/or Controlled Corporations (GOCCs) not considered as GBEs. Effective Date

PAG2. This PPSAS shall apply for annual financial statements covering periods beginning January 1, 2014. PPSAS 4 - The Effects of Changes in Foreign Exchange RatesJanuary 2014 Page 2