Compliance With IFRS IAS21 – ETI and The Effects of Changes in Foreign Exchange Rates


Saturday, December 15, 2018     09.28AM / OpEd By Research 


IAS 21 prescribes how to account for the use of different currencies when presenting financial statements.


ETI has the following notes in its AFS 2017:


The consolidated financial statements are presented in United States dollars, which is the Group’s presentation currency.


The results and financial position of all group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:


ii) Income and expenses for each income statement are translated at average exchange rates; (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions) ...”


The notes are compliant with IFRS - IAS21 paragraph 39 and 40 which states:


The results and financial position of an entity whose functional currency is not the currency of a hyperinflationary economy shall be translated into a different presentation currency using the following procedures...


(b) income and expenses for each statement presenting profit or loss and other comprehensive income (ie including comparatives) shall be translated at exchange rates at the dates of the transactions (IAS21.39)


For practical reasons, a rate that approximates the exchange rates at the dates of the transactions, for example an average rate for the period, is often used to translate income and expense items. However, if exchange rates fluctuate significantly, the use of the average rate for a period is inappropriate (IAS21.40)


IFRS is explicit that average exchange rates are not appropriate when exchange rates fluctuate!



Despite this however, it would appear that Ecobank continues to use average exchange rates to present its financial statements while the CEDI, CFA and NGN fluctuate against the US Dollar (its presentation currency).

IFRS IAS21 Paragraph 55 states categorically that “When an entity presents its financial statements in a currency that is different from its functional currency, it shall describe the financial statements as complying with IFRSs only if they comply with all the requirements of IFRSs including the translation method set out in paragraphs 39 and 42.” (IAS 21.55).



Fig 1: Ecobank:  2018 Q3’ Results Press release - 23 October 2018

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Proshare has in the past raised/questioned ETI’s continued use of the CBN exchange rates while all other Banks in Nigeria use the NAFEX rate to convert their results in this November 09, 2018 post:

Is ETI The Only Bank Using CBN Rates To Convert Its USD Results Into NGN and Vice Versa?




CEDI vs USD from 2016 to Nov 2018 (Source

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CFA vs USD from 2016 to Nov 2018 (Source

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The graphs clearly depict fluctuating exchange rates for the CEDI and the CFA / XOF.

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Source: FT


For further information, perspective and additional insight for our team, kindly e-mail us vide


Find out more information, Click here to access Ecobank’s IR Portal in Proshare Markets


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