United States

Proposed Interpretation regarding foreign currency transactions


International Accounting Standard 21, The Effects of Changes in Foreign Exchange Rates, provides requirements about which exchange rate to use when recording a foreign currency transaction on initial recognition in the entity’s functional currency. However, the IFRS Interpretations Committee (IFRIC) has observed diversity in practice in circumstances in which consideration was received or paid in advance of the recognition of the related asset, expense or income. As a result, IFRIC recently issued a proposed Interpretation, Foreign Currency Transactions and Advance Consideration, which addresses how to determine the date of the transaction for the purpose of determining the spot exchange rate used to translate the asset, expense or income (or part of it) on initial recognition that relates to, and is recognized on the derecogntion of, a non-monetary prepayment asset or a non-monetary deferred income liability. The draft Interpretation is available for comment until January 19, 2016.