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monetary assets and liabilities

In the process of translating foreign-currency denominated assets and liabilities into a firm’s functional currency, monetary assets and liabilities are items that represent a claim to receive, or an obligation to pay, a fixed amount of foreign currency units.

Foreign-currency denominated cash balances, accounts payable and receivable, and long-term debt are examples of monetary assets and liabilities. By contrast, non monetary items are physical assets such as inventory and fixed assets.

In the monetary/non monetary method of translation for the balance sheet, monetary items are translated at the current rate, while non monetary items are translated at historical rates.