IASB sets out accounting requirements for when a currency is not exchangeable

The International Accounting Standards Board (IASB) has today issued amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates that will require companies to provide more useful information in their financial statements when a currency cannot be exchanged into another currency.

The amendments respond to stakeholder feedback and concerns about diversity in practice in accounting for a lack of exchangeability between currencies. The amendments will help companies and investors by addressing a matter not previously covered in the accounting requirements for the effects of changes in foreign exchange rates.

These amendments will require companies to apply a consistent approach in assessing whether a currency can be exchanged into another currency and, when it cannot, in determining the exchange rate to use and the disclosures to provide.

Linda Mezon-Hutter, Vice-Chair of the IASB, said:

These amendments fill a gap in our accounting standards. Diverse views on assessing whether a currency can be exchanged into another currency, and the exchange rate to use when it cannot, could lead to material differences in companies’ financial statements. The amendments will improve the usefulness of information provided to investors.

The amendments will become effective for annual reporting periods beginning on or after 1 January 2025. Early application is permitted.

For further information on the new requirements and the benefits they bring, watch this webcast.

The amendments will be consolidated into IAS 21 and IFRS 1 in March 2024, at which point they will be available for users with a free website registration.

The IASB’s Press Release can be accessed at https://www.ifrs.org/.

15 August 2023