FYI Article – Changes to Published Exchange Rates

February 2017

Effective March 1, 2017, the Bank of Canada will reduce the number of foreign currency exchange rates published and no longer publish noon and closing rates. Instead, a single indicative rate per currency pair will be published each day.

This indicative rate will be a daily average rate, calculated using a methodology that will reflect the average exchange rate observable throughout the Canadian business day. The details of the Bank’s methodology were released in an announcement on December 1, 2016.

What Does this Mean for IFRS Reporters?

The IFRS Discussion Group, a committee of the Accounting Standards Board, discussed the implications this change may have when applying the requirements in IAS 21 The Effects of Changes in Foreign Exchange Rates.

The Group discussed whether the new indicative daily rate for the published currency pairs will be acceptable under IAS 21 as:

  • the spot exchange rate for initial recognition of foreign currency transactions and the exchange rate at the dates of the transactions for income and expenses;
  • the closing rate for purposes of translating foreign currency monetary items at the end of the reporting period; and
  • the closing rate to translate assets and liabilities for an entity whose functional currency is not the presentation currency, or for a foreign operation within a reporting entity, into the presentation currency.

The Group also talked about other sources of foreign exchange rates that exist in the market place.

To find out more, read the Group’s November 29, 2016 Meeting Report or listen to the audio webcast.

Other Application Issues

The Group discusses IFRS application issues on a wide range of topics. If you have an issue that you would like to submit, see the submission requirements. For other discussions, check out the Group’s searchable database for past topics, or come to an upcoming meeting.

Contact:

Davina Tam, CPA, CA
Principal, Accounting Standards Board
Phone: +1 (416) 204-3514
Email: dtam@cpacanada.ca