Updated on 4 July 2013
Definition: Monetary items constitute the money supply.
Monetary items are defined by the IASB in IAS 21The Effects of Changes in Foreign Exchange Rates, Par. 8.
‘Monetary items are money held and items to be received or paid in money.’
The second part of the IAS 29 definition is not correct. When a non–monetary item, e.g., a raw material item, is bought on credit, the trade debtor amount in the supplier’s accounts is not a monetary item just because it will be paid in money or because it will be paid in a fixed or determinable number of units of currency. It can be paid in strawberries or diamonds too, if the supplier will accept strawberries or diamonds as a medium of payment. That will not make the non–monetary raw material a strawberry item or diamond item, just like payment in money does not, necessarily, make a non–monetary raw material item, a monetary item. Money or strawberries or diamonds are simply used as the mutually agreed medium of exchange. The constant real value non–monetary trade debtor amount relates to the sale of a non–monetary item, namely the non–monetary raw material. That is the fundamental factor: what is the underlying nature of the trade debtor or trade creditor? The trade debt for the payment of a raw material item has an underlying non–monetary nature. All items – monetary and non–monetary items – are normally received or paid in money.
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