What is the required treatment for long-term monetary items denominated in a foreign currency according to AASB 121 and what is a concern that has been raised about the treatment?

Long-term foreign currency monetary items are required to be re-translated at the spot exchange rate at reporting date and the difference is deferred to be recognised/amortised over the life of the monetary item. The concern that has been raised is that the deferred items are not assets or liabilities in terms of the conceptual framework and are therefore meaningless in the statement of financial position and misleading for users of the financial statements.

Long-term foreign currency monetary items are not required to be re-translated at reporting date. The concern raised is that the failure to reflect the effect of changes in the exchange rate on items that are exposed to forex risk does not provide useful information for decision making about the risk exposure of the reporting entity.

Long-term foreign currency monetary items are required to be re-translated at the spot rate at reporting date and any differences treated as gains or losses in the statement of comprehensive income. The concern raised about this treatment is that the amounts of profit and loss recognised in the statement of comprehensive income are actually unrealised and there is considerable doubt about whether or not they would ever be realised as a result of the fluctuating nature of exchange rates.

Long-term foreign currency monetary items are not required to be re-translated at reporting date, but the exchange rates, maturity dates and applicable forward rates are required note disclosures. The concern raised about this treatment is that the need to reflect the risk exposure in foreign currency denominated monetary items is not addressed through measurement, but only through disclosure, leaving the burden of assessing the impact on the financial position and performance of the entity up to the user.