Draft IFRIC Interpretation DI/2015/2 Foreign Currency Transactions and Advance Consideration

IAS 21 The Effects of Changes in Foreign Exchange Rates sets out requirements about which exchange rate to use when recording a foreign currency transaction on initial recognition in the entity’s functional currency. However, the Interpretations Committee 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.

The draft IFRIC Interpretation 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 recognised on the derecognition of, a non-monetary prepayment asset or a non-monetary deferred income liability. It proposes that:

(a) the date of the transaction is the earlier of the date of initial recognition of the non-monetary prepayment asset or deferred income liability, and the date the asset, expense or income recognised in the financial statements.

(b) if the transaction is recognised in stages, a date of transaction is established for each stage.

(c) when there is more than one date of the transaction, the exchange date for each date shall be applied to translate that part of the transaction.

To download the Draft Interpretation, click here