Proposed IGRAP on Foreign Currency Transactions and Advance Consideration

Exposure Draft (ED) 202 is a proposed Interpretation of the Standards of GRAP on Foreign Currency Transactions and Advance Consideration. In monitoring convergence with the International Accounting Standards Board, the Board agreed to develop an Interpretation to the Standards of GRAP (IGRAP) based on IFRIC 22.

IFRIC 22 clarifies which exchange rate to use in transactions that involve advance consideration paid or received in a foreign currency. The guidance in IFRIC 22 was adapted for the local public sector environment in order to develop the IGRAP. The IGRAP supports the application of the Standard of GRAP on The Effects of Changes in Foreign Exchange Rates (GRAP 4).

Entities in the public sector that apply Standards of GRAP and who undertake foreign exchange transactions that involve advance consideration paid or received in a foreign currency will be affected by this Interpretation.

The Interpretation addresses how to determine the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or revenue on the derecognition of a non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration in a foreign currency.

When an entity pays or receives consideration in advance in a foreign currency, it generally recognises a non-monetary asset or non-monetary liability before the recognition of the related asset, expense or revenue. The related asset, expense or revenue is the amount recognised applying the relevant Standard of GRAP, which results in the derecognition of the non-monetary asset or non-monetary liability arising from the advance consideration.

The exchange rate to use on the initial recognition of the related asset, expense or revenue, is the exchange rate that was used on the date on which the entity initially recognised the non-monetary asset or non-monetary liability.

ED 202 has a comment deadline of 28 April 2022. Access ED 202 here.

Disclaimer

The article has been prepared by the Secretariat of the ASB for information purposes only. It has not been reviewed, approved, or otherwise acted on by the Board.