A loan is made to a company of $20,000, which is equal to :10,000 at the date of the loan during year 1. The loan is legally denominated in dollars. At the end of year 1, the loan is translated as :9,500 and at the end of year 2 as :10,500. During year 3, the loan is repaid, the proceeds being converted to :10,600. The company keeps accounts in euros.

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

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