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

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21 Oct, 2015

The IASB’s IFRS Interpretations Committee has published a draft interpretation 'Foreign Currency Transactions and Advance Consideration'. Comments are requested by 19 January 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.


Proposed guidance


The interpretation is intended to address foreign currency transactions where

  • there is consideration that is denominated or priced in a foreign currency;
  • the entity recognises 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 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 recognised 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.


On initial application, entities would 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.


Comment deadline and additional information

Comments on DI/2015/2 Foreign Currency Transactions and Advance Consideration are requested by 19 January 2016. Please click for:

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