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IASB amends standard on foreign exchange

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15 Dec 2005

The IASB has issued a limited amendment to IAS 21 The Effects of Changes in Foreign Exchange Rates.

The amendment responds to concerns expressed by the IASB's constituents earlier this year that IAS 21 as amended in December 2003 required different accounting depending on the currency in which a monetary item was denominated where such an item was regarded as part of an entity's investment in a foreign operation. Secondly, IAS 21 was not clear on whether any member of a consolidated group could enter into the monetary transaction with the foreign operation. In response to those concerns, the IASB reviewed IAS 21 and reached the following decisions, which are reflected in the amendment:
  • As regards a monetary item that forms part of an entity's investment in a foreign operation, the IASB concluded that the accounting treatment in consolidated financial statements should not be dependent on the currency of the monetary item.
  • Also, the accounting should not depend on which entity within the group conducts a transaction with the foreign operation.
The amendment is available for adoption with immediate effect. Click for IASB Press Release (PDF 52k).

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