Let us understand what is meant a monetary item and a non-monetary item.

Monetary item

Monetary item represents a right to receive or an obligation to deliver a fixed or determinable number of units of a currency.

Some of the examples of a monetary item are investment in debt security in foreign currency classified as amortised cost.  This is recorded as a monetary item, because the entity would hold this item till maturity and on maturity would receive the stated maturity amount from the issuer in a pre-determined number of units of the foreign currency.

  • Pension benefits payable in cash
  • Provisions to be settled in cash
  • Dividends payable by an entity recognised as liability

Non-monetary item

In a non-monetary item, there is no existence of a right to receive or an obligation to pay a fixed or determinable number of units of a currency.

For example, investment in equity shares denominated in foreign currency.  This is recorded as a non-monetary item because the entity will be able to get the investment back only by selling the same either in a stock exchange or privately.  In other words, the entity has no right to receive a fixed or determinable number of units of such foreign currency from the issuer.

  • Pre-paid expenses
  • Investment in intangible assets
  • Investment in DPE

Now for all these examples, the entity will not be able to receive a fixed or determinable number of units of a specified currency.

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