The draft Interpretation has been published by the International Accounting Standards Board’s IFRS Interpretations Committee (‘the Interpretations Committee’).
The Interpretations Committee received a question about which exchange rate to use when reporting transactions that are denominated in a foreign currency in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates. The request described a circumstance in which a customer paid for goods or services by making a non-refundable payment in advance.
IAS 21 sets out requirements about which exchange rate to use when recording a foreign currency transaction on initial recognition in an entity’s functional currency. However, the Interpretations Committee observed some diversity in practice in circumstances in which consideration was received or paid in advance of the recognition of the related asset, expense or income.
Consequently, the Interpretations Committee developed the draft Interpretation. Comments to be received by 19 January 2016.