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IFRS Interpretations Committee publishes draft interpretation on foreign currency transactions and advance consideration

  • IFRS - IASB Image

Oct 21, 2015

On October 21, 2015, the International Accounting Standards Board's (IASB) IFRS Interpretations Committee published a draft interpretation "Foreign Currency Transactions and Advance Consideration". Comments are requested by January 19, 2016.

The IFRS Interpretations Committee observed some diversity in practice regarding the exchange rate used when reporting transactions that are denominated in a foreign currency in accordance with IAS 21, The Effects of Changes in Foreign Exchange Rates in circumstances in which consideration is received or paid in advance of the recognition of the related asset, expense or income. As a consequence, the Interpretations Committee decided to develop an interpretation to provide guidance in these specific circumstances.

The Interpretations Committee came to the following conclusion:

  • The date of the transaction, for the purpose of determining the exchange rate, is the earlier of (a) the date of initial recognition of the non-monetary prepayment asset or deferred income liability and (b) the date that the asset, expense or income is recognised in the financial statements.
  • If the transaction is recognized in stages, a date of transaction is established for each stage.
  • When there is more than one date of the transaction, the exchange rate for each date is to be applied to translate that part of the transaction.

Review the press release and draft interpretation on the IASB's Web Site.

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