| 25.2 | A foreign currency transaction is a transaction that is denominated or requires settlement in a foreign currency, including transactions arising when a micro-entity: |
| (a) | buys or sells goods or services whose price is denominated in a foreign currency; |
| (b) | borrows or lends funds when the amounts payable or receivable are denominated in a foreign currency; or |
| (c) | otherwise acquires or disposes of assets, or incurs or settles liabilities, denominated in a foreign currency. |
| 25.3 | A micro-entity shall record a foreign currency transaction by applying to the foreign currency amount the spot exchange rate at the date of the transaction unless: |
| (a) | the transaction is to be settled at a contracted rate, in which case that rate shall be used; or |
| (b) | where a trading transaction is covered by a related or matching forward contract, in which case the rate of exchange specified in that contract shall be used. |
| 25.4 | The date of a transaction is the date on which the transaction first qualifies for recognition in accordance with this FRS. For practical reasons, a rate that approximates the actual rate at the date of the transaction is often used, for example, an average rate for a week or a month might be used for all transactions in each foreign currency occurring during that period. However, if exchange rates fluctuate significantly, the use of the average rate for a period is inappropriate. |
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