APPLICABILITY OF INTERNATIONAL ACCOUNTING STANDARDS (IAS) ON THE EFFECTS OF VARIATIONS IN CURRENCY EXCHANGE RATES ON COMPANIES.

Written by:Diomer Antonio Galán Rincón.

Bachelor's Degree.Public Accounting / MSc.Science of Higher Education.

First of all, a big greeting to all the friends of Steemit and especially to the members of this prestigious PH community. Continuing with the series of publications related to accounting sciences, today I will develop the subject related to the application of International Accounting Standards IAS 21 on the effects of variations in currency exchange rates in companies, as well as their objectives, essential elements for a correct valuation and accounting record of company transactions.

Nowadays, there have been elements that have had a great impact on the financial context, which is a product of globalization and internationalization of the world economy. These changes have founded the need to be able to create accounting standards and principles that can be used and understood by the variety of users of financial information around the world.

Organizations have been directly involved in the profound changes that are currently required, where all the internal and external elements that influence companies are included; for this reason, the purpose of the International Accounting Standards Committee (IASC) is to seek a set of unique accounting standards at international level, whose regulations are approved by the International Accounting Standards Board (IASB).

In addition to providing a single chart of accounts worldwide, it is the international standard that deals specifically with the activities that regulate the accounting treatment of transactions carried out with foreign currency and the operations performed by an entity abroad, which is dealt with by the international accounting standard IAS-21.

This standard expresses that its adoption is related to the socio-economic aspect of each country; as well as the accounting for the presentation of the accounts to be disclosed will be related to the accounting treatment given by the accountants to their companies.

Due to the constant change of the companies in the countries a group of standards were created which establish how to perform accounting procedures, to treat different activities, allowing to make a comparison with other countries and thus help to establish an exchange of information; These standards have been made thanks to a deep work of several studies and efforts of various entities in the accounting area globally.

The International Accounting Standards (IAS), as they are commonly known, are a set of standards that establish the way in which information should be presented in financial reports and the way in which that information should be reflected in such financial statements. Moreover, they are not physical or natural laws, but rather rules that man, according to his experiences, has qualified as important in the presentation of information.

They are high-level, investor-oriented standards, whose main and sole purpose is to express the economic substance of the transactions carried out, and to demonstrate a true and fair view of the economic position of the organization. 41 standards have been issued to date.

The objective of this Standard is to prescribe how to incorporate, in an entity's financial statements, foreign currency transactions and foreign operations, and how to translate the financial statements into the chosen presentation currency.

In addition to how to record the exchange rate or rates to be used, as well as how to report the effects of changes in exchange rates in the financial statements.

In view of this Venezuelan reality, there is no doubt that companies face a problem when applying IAS 21, where the main inconveniences are the conversion of the exchange rate to be used, as well as the way to present the effects of the variations, the preparation and presentation of the financial statements.

The above described, generates a strong impact in the figures of the financial statements, especially in the recognition of the debts of previous years, since they must be valued at the rate for the exchange at which it is expected to be liquidated, due to the difficulties in the exchange policies of our country, this rate has reached more than 1,000%. This generates that the financial statements are not in faithful compliance with the norms, nor the regularization of the state, representing business difficulties, since it brings as alternatives the presentation of the information if the applicability of the norm.

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