On 8 December 2016, the IASB published IFRIC 22 – Foreign Currency Transactions and Advance Consideration. This interpretation clarifies the accounting treatment of foreign currency transactions, including the payment or receipt of advance consideration. It includes illustrative examples.
Keywords: Mazars, Thailand, IFRS, IFRIC 22, IASB, IAS 8
08 February 2017
The interpretation applies to all foreign currency transactions that meet the following criteria:
- The transaction involves consideration that is denominated or priced in a foreign currency;
- A prepayment asset or deferred income liability is recognised prior to the transaction;
- The prepayment asset or deferred income liability is non-monetary.
According to the new interpretation:
- The transaction date, for the purpose of determining the exchange rate used, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability;
- If there are multiple payments or receipts, the transaction date shall be determined separately for each payment or receipt.
The new interpretation is mandatory for financial periods commencing on or after 1 January 2018. Early application is permitted.
Various transition options are available:
- Retrospective application in accordance with IAS 8;
- Prospective application to all foreign currency assets, liabilities, income and expenses within the scope of the interpretation that are initially recognised on or after the beginning of the reporting period in which the entity first applies the interpretation;
- Prospective application to all foreign currency assets, liabilities, income and expenses within the scope of the interpretation that are initially recognised on or after the beginning of the comparative period presented.