On 28 February 2018, IFRIC 22 Foreign Currency Transactions and Advance Consideration was endorsed by the European Commission for use in the European Union. The EU effective date is the same as the IASB’s effective date (annual periods beginning on or after 1 January 2018).
IFRIC 22 was issued by the IASB in December 2016 to clarify the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency.
Scope of the interpretation
This Interpretation applies to a foreign currency transaction (or part of it) when an entity recognises a non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration before the entity recognises the related asset, expense or income (or part of it).
Conclusions
- The date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration.
- If there are multiple payments or receipts in advance, the entity shall determine a date of the transaction for each payment or receipt of advance consideration.
Transition
On initial application, entities apply the interpretation either retrospectively or prospectively.
More information about IFRIC 22 can be found in our Accounting Newsletter from January 2017. The full version of the Interpretation is available here.
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