IASB, amendments, foreign exchange rates
Tax & AccountingApril 20, 2021

IASB Proposes Amendments on the Effects of Changes in Foreign Exchange Rates

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IASB Proposes Amendments on the Effects of Changes in Foreign Exchange Rates

The IASB proposes amendments on the effects of changes in foreign exchange rates. The amendments are in the Exposure Draft, Lack of Exchangeability – Proposed Amendments to IAS 21. The Exposure Draft proposes amendments to International Accounting Standard (IAS) 21, The Effects of Changes in Foreign Exchange Rates, to help companies determine whether a currency can be exchanged into another currency and what accounting to apply if the currency cannot be exchanged. The comment deadline is September 1, 2021.

IAS 21 sets out the exchange rate a company uses when it reports foreign currency transactions or a foreign operation’s results in a different currency. However, IAS 21 does not set out the exchange rate to use when there is no observable exchange rate the company can use, such as when a currency cannot be converted into a foreign currency. The IASB’s proposed amendments to IAS 21 would help companies identify whether this situation applies to them and the accounting to apply when it does.

The IASB expects that the amendments in the Exposure Draft, if adopted as proposed, would improve the usefulness of the information provided to investors by requiring a consistent approach to determining whether a currency is exchangeable into another currency and, when it is not, determining the exchange rate to use and the disclosures to provide.

The IASB has published a webcast to accompany the Exposure Draft. The webcast provides an overview of the Exposure Draft and answers some commonly asked questions.

By CCH ARM Editorial

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