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We have foreign debtors & creditors in our accounts. How do you prepare a sensitivity analysis for the risk management note in financials on foreign currency risk? Can I take the year end revaluation of the foreign debtors & creditors and analyze the sensitivity for plus/minus percentages (say for instance +/-5%)? Can someone tell me how to do this as per IFRS 7 - Financial instruments.
in IFRS 7 - Financial Instruments: Disclosures by

1 Answer

+1 vote
You should see the past data on exchange rate variations and decide on the reasonably possible change in rate. You need to calculate the effect on both profit before tax and equity. If you have only foreign debtors & creditors then you can use the +/- sensitivity rate and calculate the exchange gain/loss and report the impact on profit before tax. If you have no other foreign transactions impact on the equity will be the same.