IAS 21 — Draft interpretation on foreign currency transactions and advance consideration — sweep issue

Date recorded:

The project manager introduced the agenda paper. She said that during the drafting process a concern was raised about the interaction of the proposed draft Interpretation and the presentation in profit or loss of exchange differences arising on the related trade receivable or trade payable balances. She clarified that the staff proposal on the IAS 21 interpretation did not address where exchange differences should be recognised, in particular that they did not intend to imply that foreign exchange differences could be included in the same line item as the related foreign currency transaction (i.e. revenue or cost of sales). Accordingly, she said that the staff proposed to clarify in the Basis for Conclusions that the interpretation did not address in which line item exchange differences arising on the settlement or retranslation of monetary items should be classified or presented within profit or loss. She then opened the discussion to the Committee members.

There was general concern expressed by the Committee members in relation to adding the suggested clarification to the Basis for Conclusions. Most concerns were focused on the fact that it could be interpreted as saying that it would be possible to include foreign exchange differences in revenue or cost of sales. Other concerns were related to the fact that they were addressing IAS 21 and not IFRS 15. Several Committee members said that they would prefer not to mention anything.

The Chairman concluded that there was consensus for rejecting the staff recommendation. He said that the next steps would be that the staff would provide a drafting to the Board and if they did not object then they would be able to expose it. One Committee member indicated that he would dissent.

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