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The Interpretations Committee considered a sweep issue and reconfirmed its general agreement that the staff should prepare the draft Interpretation for ballot, subject to no significant matters arising from discussions at the IASB meeting.

 12 May 2015


The Interpretations Committee continued its discussions on the development of an Interpretation of paragraphs 21–22 of IAS 21. The proposed guidance addresses how to determine the date of the transaction for the purposes of IAS 21. The date of the transaction determines the spot exchange rate used to translate a foreign currency transaction on initial recognition of the asset, expense or income (or part of it) that follows the recognition of a non-monetary prepayment asset or a non-monetary deferred income liability.

At this meeting, the Interpretations Committee considered the interaction of the proposed draft Interpretation and the presentation in profit or loss of exchange differences arising on monetary trade receivable or trade payable balances.

Subsequent to the initial recognition of a foreign currency balance sheet item, paragraphs 28–29 of IAS 21 require that exchange differences arising on the settlement of monetary items or on translating monetary items at the end of the reporting period should be recognised in profit or loss in the period in which they arise (subject to a few specified exceptions). The Interpretations Committee noted that IFRS does not specify in which line item within profit or loss such exchange differences should be presented.

However, the concern raised to the Interpretations Committee was that the proposed draft Interpretation implies that such exchange differences should not be recognised in the same line item as the foreign currency transaction. This is because it specifies the exchange rate to use to recognise a foreign currency transaction that is recognised in profit or loss.

In developing the proposed draft Interpretation, the Interpretations Committee did not intend to address exchange differences arising on the subsequent retranslation of monetary items, nor did it intend to address in which line item such exchange differences should be recognised.

Thirteen of the fourteen members of the Interpretations Committee tentatively decided not to include a discussion about the presentation of exchange differences arising on the settlement or retranslation of monetary items in the Basis for Conclusions of the draft Interpretation. Their reasoning was that it is not relevant to the issue being addressed by the proposed Interpretation, which is the meaning of the ‘date of the transaction’ for the purposes of the initial recognition of a foreign currency transaction in the functional currency in accordance with paragraph 21 of IAS 21. The presentation of foreign exchange gains and losses arising subsequent to the date of the transaction is not relevant to the date of the measurement of the foreign currency transaction in the functional currency on initial recognition.

The Interpretations Committee reconfirmed their general agreement that the staff should prepare the draft Interpretation for a written ballot, subject to no significant matters arising from discussions at the IASB (thirteen members of the Interpretations Committee agreed). One member voted against the proposal. The staff noted that in accordance with the IFRS Foundation’s Due Process Handbook, the Basis for Conclusions to the draft Interpretation will identify any areas in which some members of the Interpretations Committee hold strong views in opposition to the draft Interpretation.

Next steps

The staff will present a paper to the IASB at one of its future meetings, which will summarise the technical analysis and due process that the Interpretations Committee has undertaken to develop the proposed draft Interpretation.

If no significant matters arise from discussions at the IASB meeting, the staff will prepare the draft Interpretation for a written ballot.




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