CRA indicates that FX gains or losses on pre-transition debts are not affected by an s. 111(4)(e) election made following an acquisition of control

Where a taxpayer with an elected functional currency (e.g., the USD) has an accrued FX loss on a debt obligation owing in another foreign currency (e.g., the euro), an s. 111(4)(e) election made following an acquisition of control of the taxpayer will not affect the FX gain which would be realized under s. 261(10) re a pre-transition debt, so that it is only changes in the euro/USD exchange rate occurring from the beginning of the taxpayer’s first "functional currency year" up to the acquisition of control that would be subject to ss. 111(4) and (12).

Neal Armstrong. Summary of 7 October 2016 APFF Roundtable, Q. 17 under s. 111(4)(e).