Is that item monetary or forex gain or loss in tally-monetary? If you determine the nature of your item incorrectly, it can lead to totally wrong presentation in the financial statements. It’s not so important when you consolidate and you need to translate some foreign subsidiary to your own presentation currency, right?
Because, the rules in IAS 21 The Effects of Changes in Foreign Exchange Rates say that in such a case, you translate all your assets and liabilities by the closing rate. But when it comes to translating individual items and transactions in your own financial statements to the functional currency, then the rules are more complex. For translation of the amounts in foreign currency to your functional currency, the standard IAS 21 states that you should re-calculate all items after initial recognition using exchange rate based on characteristics of the specific item. What is monetary and what is non-monetary? A right to receive or obligation to deliver a fixed or determinable number of units of currency.