Let us see how the financial statements are translated to presentation currency
Financial statements should be translated to presentation currency if the currency is different from the functional currency.
The assets and liabilities are translated based on the closing rate at which the balance sheet is prepared.
Income and expenses are translated at the exchange rate at the respective transaction dates.
Sometimes, this could also be based on the average rate for a period where the exchange rates do not fluctuate significantly.
The exchange differences arising on account of translation of the financial statements to the presentation currency are recognised in other comprehensive income.
Note that the exchange differences on monetary as well as non-monetary items are all recognised in other comprehensive income.
The exchange difference should not be recognised in profit and loss account.