The Accounting Standards Board (AcSB) is participating in the IFRS Interpretations Committee’s project to provide guidance on how an entity should determine the exchange rate when some or all of the foreign currency consideration is paid in advance of the recognition of the related asset, expense or income and results in a non-monetary prepayment asset or a non-monetary deferred income liability.
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 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.
The AcSB’s due process includes ensuring that Canadian entities’ financial reporting needs are considered by the IFRS Interpretations Committee and issuing the AcSB’s own document for comment on each IFRS Interpretations Committee proposal. Subject to the responses to the AcSB’s Draft Interpretation on whether the proposed Interpretation is appropriate for application in Canada, the AcSB expects that the IFRIC Interpretation will be incorporated into Canadian GAAP in accordance with the AcSB’s strategy of adopting IFRSs for publicly accountable enterprises.