IASB proposes amendments to IAS 21 setting out accounting for when no foreign exchange rate exists

The IASB has today published for public comment the Exposure Draft ED/2021/4 Lack of Exchangeability (Proposed amendments to IAS 21).

The proposed amendments aim to help companies determine whether a currency can be exchanged into another currency, and what accounting to apply if the currency cannot be exchanged (further information).

IAS 21 The Effects of Changes in Foreign Exchange Rates 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, the Standard 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 proposed amendments to IAS 21 would help companies identify if this situation applies to them and the accounting to apply when it does.

The amendments would specify:

(a) when a currency is exchangeable into another currency and, consequently, when it is not;

(b) how an entity determines the exchange rate to apply when a currency is not exchangeable; and

(c) the information an entity provides when a currency is not exchangeable.

The deadline for comments is 1 September 2021.