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New Interpretation on foreign currency transactions and advance consideration

  • IFRS - IASB Image

Dec 08, 2016

On December 8, 2016, the International Accounting Standards Board (IASB) published IFRIC 22, "Foreign Currency Transactions and Advance Consideration" developed by the IFRS Interpretations Committee to clarify the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency.

Content of IFRIC 22

Issue and scope of the interpretation

The interpretation addresses foreign currency transactions or parts of transactions where:

  • there is consideration that is denominated or priced in a foreign currency;
  • the entity recognizes a prepayment asset or a deferred income liability in respect of that consideration, in advance of the recognition of the related asset, expense or income; and
  • the prepayment asset or deferred income liability is non-monetary.


The Interpretations Committee came to the following conclusion:

  • The date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability.
  • If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt.

Effective date

IFRIC 22 is effective for annual reporting periods beginning on or after January 1, 2018. Earlier application is permitted.


On initial application, entities apply the interpretation either:

  • retrospectively in accordance with IAS 8; or
  • prospectively to all foreign currency assets, expenses and income in the scope of the interpretation initially recognised on or after the beginning of the reporting period an entity first applies the interpretation in or the beginning of a prior reporting period presented as comparative information.

Review the press release on the IASB's website.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.