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IFRIC 22 - Foreign Currency Transactions and Advance Consideration


Project History

The IFRS Interpretations Committee (the IFRS IC) received a request to clarify which exchange rate to use when reporting revenue transactions denominated in a foreign currency in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates, in cases where a customer has paid for the goods or services in advance and that payment is not refundable.

IASB Draft Interpretation

On 21 October 2015, the IASB issued Draft Interpretation DI/2015/2 Foreign Currency Transactions and Advance Consideration, which proposed to clarify that the date of the transaction for the purposes of paragraphs 21-22 of IAS 21 is the earlier of:

  • the date of initial recognition of the non-monetary prepayment asset or the non-monetary performance liability; and
  • the date that the related asset, expense or income is recognised in the financial statements.

The scope of the Draft Interpretation also applied to other foreign currency transactions that are similarly affected by the issue (for example PPE acquired in a foreign currency).

In its Draft Interpretation, the IASB proposes that an entity shall apply the Draft Interpretation either:

  • retrospectively to each prior reporting period presented in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors; or
  • prospectively to all assets, expenses and income in the scope of the Draft Interpretation initially recognised on or after (i) the beginning of the reporting period in which an entity first applies the Draft Interpretation; or (ii) the beginning of a prior reporting period presented as comparative information in the financial statements of the reporting period in which an entity first applies the Draft Interpretation.

EFRAG's Comment Letter

On 13 November 2015, EFRAG published its draft comment letter.

On 5 February 2016, EFRAG published its final comment letter, in which it welcomed the guidance proposed in the Draft Interpretation, as EFRAG believed it will clarify the accounting for foreign currency transactions in which consideration was received or paid in advance of the recognition of the related asset, expense or income. EFRAG also agreed with the proposed consensus and believed it is consistent with the underlying principles in IAS 21.

IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration

On 8 December 2016, the IASB issued IFRIC 22 Foreign Currency Transactions and Advance Consideration.

EFRAG's Endorsement Advice

On 17 February 2017, EFRAG issued a draft endorsement advice letter and a separate invitation to comment relating to the endorsement for use in the EU of IFRIC 22.

On 6 April 2017, EFRAG published its final endorsement advice, in which it stated that EFRAG's overall assessment was that IFRIC 22 satisfied the criteria for endorsement for use in the EU and therefore recommended its endorsement

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