BC26 The previous version of IAS 21 allowed a choice of translating goodwill and fair value adjustments to assets and liabilities that arise on the acquisition of a foreign entity at (a) the closing rate or (b) the historical transaction rate.
BC27 The Board agreed that, conceptually, the correct treatment depends on whether goodwill and fair value adjustments are part of:
(a) the assets and liabilities of the acquired entity (which would imply translating them at the closing rate); or
(b) the assets and liabilities of the parent (which would imply translating them at the historical rate).
BC28 The Board agreed that fair value adjustments clearly relate to the identifiable assets and liabilities of the acquired entity and should therefore be translated at the closing rate.
BC29 Goodwill is more complex, partly because it is measured as a residual. In addition, the Board noted that difficult issues can arise when the acquired entity comprises businesses that have different functional cu
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