Short answer
SKK 12 provides a rule that resolves most cases. At the end of the period, monetary items in foreign currency are revalued at the closing rate and the difference goes to income, while non-monetary items measured at historical cost remain at the rate on the date they were purchased. Thus, the receivable moves, the machinery purchased abroad does not.
| Current version | SKK 12 (2023), for periods beginning on or after January 1, 2025 |
| Initial acquaintance | Spot rate on the date of the transaction, paragraph 11 |
| Monetary voices at closing | Closing course, paragraph 13(a) |
| Costly non-monetary voices | They remain on the transaction date's course, paragraph 13(b). |
| Exchange differences | In profit or loss, paragraph 15 |
| Foreign currency | Any coin other than the lek, paragraph 5 |
| Net investment in a foreign entity | Changes in equity, without reclassification, paragraph 18 |
| Hyperinflation | This standard does not address it at all. |
Verified on November 8, 2026 by Andi Haxhillari, Certified Accountant. Compared with SSAP 12 (2023), paragraphs 1 through 35, effective date January 1, 2025, and with the November 2015 version containing 38 paragraphs, which is attached below.
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The applicable version is SKK 12, updated in 2023. It applies to accounting periods beginning on or after January 1, 2025, on a prospective basis. This is specified in paragraph 34.
The November 2015 version had 38 paragraphs; the 2023 version has 35. The paragraph numbers on this page correspond to those of the version in effect.
Paragraph 4 provides three areas: the accounting treatment of transactions and foreign currency balances; the translation of foreign operations; and the translation of statements into the reporting currency.
Foreign currency financial instruments are not covered here. They fall under SKK 3.
The standard is comparable to Section 30 of the International Financial Reporting Standard for Small and Medium-sized Entities, published in July 2015.
The entire standard hinges on this distinction, so it's worth a minute.
Paragraph 5 defines monetary items as monetary instruments, as well as assets and liabilities that will be settled with a specified amount of monetary instruments. Thus, cash in euros, a euro bank account, receivables from foreign customers, payables to foreign suppliers, and loans in foreign currency.
Nonmonetary items are anything else: inventories, machinery, premises, intangible assets, and prepaid goods to be received.
Here, something needs to be said plainly. The Standard nowhere provides an explicit definition of non-monetary items. It treats them only functionally, in paragraph 13, according to how they are measured. This is a deficiency of the text itself, not of this explanation.
Paragraph 6 requires the entity to identify the currency of the primary economic environment in which it operates. For almost every business operating in Albania, this is the lek.
Paragraph 7 sets out the main criteria: the currency that primarily affects selling prices, and the one that affects the cost of labor, materials, and services.
Paragraph 8 adds the financing currency and the currency of receipts from operations.
So a business that sells in lek, pays wages in lek, and buys in lek has the lek as its functional currency, even if it has a euro loan.
Paragraph 11 requires recording at the spot rate on the transaction date. Paragraph 12 defines the transaction date as the date on which the recognition criteria are met.
The same paragraph allows for a practical concession. The average weekly or monthly rate may be used, but not when fluctuations are large.
Paragraph 13 provides three rules, and these three rules are the heart of the standard.
Monetary amounts are converted at the closing rate.
Non-monetary items measured at historical cost remain at the transaction date's exchange rate. They are not affected at all by exchange rate movements.
Non-monetary items measured at fair value are converted at the rate as of the date that fair value was determined.
Paragraph 14 provides a solution for a rare case. When the course is temporarily unavailable, the first subsequent available course is used.
Paragraph 15 sets out the basic rule. A difference arises when the rate changes between the transaction date and the settlement date, and it is recognized as gain or loss.
If the settlement is made within the same period, the entire difference is recognized then. If the settlement falls into a subsequent period, the difference is recognized period by period until settlement.
Paragraph 16 provides the exception. When another standard requires the recognition of an amount directly in equity—for example, the revaluation of long-term assets under IFRS 5—the amount is translated at the rate on the date of revaluation and the difference is also recognized in equity.
Paragraph 17 addresses long-term loans within the group that are not intended to be repaid. They are considered part of the net investment in the foreign entity. Short-term claims and obligations are not included.
Paragraph 18 provides their treatment. In the separate financial statements, differences are recognized in profit or loss. In the consolidated financial statements that include both entities, they are recognized in equity and are not reclassified to profit or loss even when the investment is sold.
Paragraph 19 requires consolidation according to the standard procedures, including the elimination of excesses and intragroup transactions.
Paragraph 22 provides a detail that is often overlooked. Goodwill and fair-value adjustments from the acquisition of a foreign entity are treated as that entity's assets and liabilities and are translated at the closing rate. Thus, they fluctuate each year with the exchange rate.
Paragraphs 26 through 29 address the case when the reporting currency differs from the functional currency. Assets and liabilities are translated at the closing rate, including comparative figures. Revenues and expenses are translated at the rates on the transaction dates. And differences are recognized in equity, without later reclassification to profit or loss.
Paragraph 24 limits the scope. The functional currency changes only if transactions, events, and underlying conditions change. It is not an accounting policy election.
Paragraph 23 requires prospective application from the date of the change, and paragraph 25 requires that all items be translated at the rate as of that date. The amounts arising for non-monetary items become their historical cost thereafter.
SKK 12 does not contain any numerical examples. The following examples were constructed by us using rounded figures.
On November 15, 2026, goods are sold for €20,000. The exchange rate that day is 101.5 lek per euro. Revenue is recognized at 2,030,000 lek and an expense of the same amount arises.
On December 31, 2026, the closing rate is 103.2 lek per euro. The receivable is a monetary item, so it is revalued at 103.2, making it 2,064,000 lek. The difference of 34,000 lek is recognized as income in the 2026 results.
The sales revenue remains at 2,030,000 lek. It is not reformulated because it was a transaction carried out at that day's exchange rate.
On March 10, 2027, the client pays at an exchange rate of 102.0 lek per euro, i.e., 2,040,000 lek. Compared with the 2,064,000 lek on the balance sheet, a loss of 24,000 lek arises in the 2027 income statement.
The total effect of the two years is 34,000 minus 24,000, so 10,000 lekë. And that is precisely the difference between the 2,040,000 lekë collected and the 2,030,000 lekë recognized as revenue.
On May 10, 2026, a machine is purchased for €15,000, at an exchange rate of 100.8 lek per euro. It is recorded on the balance sheet at 1,512,000 lek.
As of December 31, 2026, the exchange rate is 103.2 lek per euro. The machinery is not revalued. It is a non-monetary item measured at historical cost, and paragraph 13(b) requires it to be carried at the transaction date's exchange rate.
So on the balance sheet there remains 1,512,000 lekë minus depreciation, and it will remain that way even after five years, no matter how the exchange rate moves. Depreciation is always calculated on 1,512,000 lekë.
Comparing the two examples is the standard. The same coin, the same closing date, two completely different treatments, because one is monetary and the other is not.
Paragraph 30 requires two things. The amount of foreign exchange differences recognized in profit or loss, except those arising from the fair value measurement of financial instruments under IFRS 3. And the net difference recognized in equity as a separate component, with a reconciliation between the beginning and end of the period.
Paragraph 32 requires the reporting currency to be stated. If it differs from the functional currency, this is noted, information about the functional currency is provided, and the reason is explained.
Paragraph 33 requires that any change in the functional currency be disclosed, along with the reason.
The first mistake is revaluing assets purchased abroad at year-end. Machinery and premises are non-monetary items and are not affected by the closing exchange rate.
The second mistake is failing to revalue foreign currency accounts. Cash, bank accounts, clients, and suppliers denominated in euros should be converted at the closing rate on each reporting date.
The third mistake is reformulating sales revenue when the exchange rate changes. Revenue remains at the rate on the date of the transaction. Only the demand moves.
The fourth mistake is using an annual average course even when the fluctuations have been large. Paragraph 12 allows the average only when the fluctuations are small.
The fifth mistake is not separating advances. An advance given for goods to be received is not collected in cash, so it is not treated as a monetary item.
The closing rate, but only for monetary items. Non-monetary items measured at historical cost remain at the rate as of the date they were recognized.
No. It is a non-monetary item measured at historical cost. Its value in lek remains that of the purchase date.
In profit or loss, according to paragraph 15. Exceptions are cases under paragraphs 16 and 18, which relate to capital.
Yes, for practical reasons, according to paragraph 12. But not when the fluctuations within the period have been large.
It depends on the criteria of paragraphs 7 and 8, not on the currency of the invoices. If salaries, rent, and most costs are in lek, the functional currency remains the lek.
If it is not planned to be repaid, it is part of the net investment. In the separate statements, differences go to income; in the consolidated statements, they go to equity, without any subsequent reclassification.
No. The word "hyperinflation" does not appear anywhere in the text. There is no section for it.
No. Paragraph 34 requires prospective application.
The content of this page is based on reading the 2023 version on the National Council of Accountancy's website. The paragraphs are summarized in our own words; they are not verbatim quotes.
The exchange rate is not set by this standard. For official rates, the Bank of Albania's source is used, and the figures in the examples above are illustrative, not actual rates for those dates.
The PDF attached below is the November 2015 version with 38 paragraphs, and its numbering does not match the current version.
SIC 12 “Effect of Changes in Foreign Exchange Rates,” updated in 2023, paragraphs 1 through 35. Effective date January 1, 2025, with prospective application as provided in paragraph 34.
The standard refers to the “accounting law” without citing its number. The law in force is Law No. 25/2018 “On Accounting and Financial Statements,” as amended by Law No. 87/2026.
Links to other standards. Financial instruments in IFRS 3. Impairment of long-term assets in IFRS 5. Consolidation and goodwill in IFRS 9. Materiality in paragraphs 64 to 68 of IFRS 1.
The following document is the November 2015 version with 38 paragraphs, the one in our library that was in effect until the end of 2024. The version currently in force is the updated 2023 version with 35 paragraphs.
Source of the official text: National Council of Accountancy, standards effective January 1, 2025.