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The Interpretations Committee tentatively decided to develop an interpretation on the issue.

 11 November 2014


The Interpretations Committee considered a submission that asked how to determine which exchange rate to use when reporting revenue transactions denominated in a foreign currency in accordance with IAS 21. In particular, the submission described a circumstance in which the customer paid for the goods or services by making a non refundable payment in advance.

The Interpretations Committee noted that outreach indicates that:

  1. the issue affects a number of jurisdictions, particularly in the construction industry;
  2. there is diversity in practice between recognising revenue using the exchange rate at the date of the receipt of the non-refundable advance payment and the exchange rate at the date of the transfer of goods or services; and
  3. the diversity is expected to continue after the implementation of IFRS 15.

The Interpretations Committee noted that paragraphs 21–22 of IAS 21 require that a foreign currency transaction should be recorded, on initial recognition in the functional currency, by applying the spot exchange rate at the date on which the transaction first qualifies for recognition in accordance with IFRS.

The Interpretations Committee tentatively concluded that IAS 21 is not entirely clear on whether revenue should be recognised using the exchange rate at the date of the advance payment or at the date of recognition of the revenue. However, most members of the Interpretations Committee think that recognising revenue using the exchange rate at the date of the advance payment (or at the date that the advance payment is due, if earlier) may be a more appropriate interpretation of IAS 21, because:

  1. an entity is no longer exposed to foreign exchange risk once it has received the cash;
  2. the obligation to transfer goods or services (which gives rise to deferred revenue on recognition of an advance cash receipt) and the performance of that transfer (which gives rise to revenue) is a single transaction; and
  3. it is consistent with the treatment of deferred revenue as a non-monetary item that is not retranslated after initial recognition in accordance with paragraph 23 of IAS 21.

The Interpretations Committee tentatively decided to develop guidance on identifying the date of the transaction for revenue transactions denominated in a foreign currency, as an interpretation of paragraph 22 of IAS 21.

The Interpretations Committee noted that the issue interacts with IFRS 15 and that to the extent that issues arise in respect of IFRS 15, the Transition Resource Group for Revenue (TRG) should be informed of those issues.

The staff will present further analysis at a future meeting of the Interpretations Committee.

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