FRS 23 has the effect, for those entities that are applying it, of implementing IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’ and withdrawing an existing UK standard, SSAP 20 ‘Foreign currency translation’.

The FRS applies, for accounting periods beginning on or after 1 January 2005, to all listed entities preparing their financial statements in accordance with UK requirements—including listed parent undertakings preparing individual financial statements in accordance with those requirements.  Other entities are permitted to apply the FRS, as long as they apply certain other FRSs at the same time.  For accounting periods beginning on or after 1 January 2006, unlisted entities using fair value measures will also be required to comply with the FRS.  Proposals on the application of the FRS to other unlisted entities are expected to be issued during the first half of 2005.

An entity may carry on foreign activities in two ways.  It may have transactions in foreign currencies or it may have foreign operations.  In addition, an entity may present its financial statements in a foreign currency.  FRS 23 prescribes how entities should include foreign currency transactions and foreign operations in their financial statements and how they should translate financial statements into a presentation currency.

In December 2005 the ASB issued an amendment to FRS 23, making changes to the UK standard to correspond to those made by the IASB to IAS 21.  These changes amended and clarified the requirements for the inclusion of intra-group loans in the net investment in a foreign operation.