A loan is made to a company of $20,000, which is equal to i10,000 at the date of the loan during year 1. The loan is denominated in dollars. At the end of year 1 the loan is translated as i9,500, at the end of year 2 as i10,500 and during year 3 it is repaid, the proceeds being converted to i10,600. The company keeps accounts in euros.

(a) Show the accounting entries for each year, explaining your workings.

(b) State how, under the appropriate IFRSs, you would deal with the gains or losses on exchange for each year, at that time. Justify your answer.