17 February 2017

EFRAG requests comments on its draft endorsement advice on IFRIC 22 Foreign Currency Transactions and Advance Consideration

EFRAG is consulting on its assessment of IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration against the endorsement criteria in the IAS Regulation, including the technical criteria and whether IFRIC 22 is conducive to the European public good.

The objective of IFRIC 22 is to clarify how the date of the transaction should be assessed for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability arising from advance consideration in a foreign currency.

IFRIC 22 becomes effective for annual periods beginning on or after 1 January 2018, with earlier application permitted.

In order to provide EFRAG´s endorsement advice as EC has requested, EFRAG has first assessed whether IFRIC 22 would meet the technical criteria for endorsement, in other words whether IFRIC 22 would provide relevant, reliable, comparable and understandable information required to support economic decisions and the assessment of stewardship, lead to prudent accounting and not be contrary to the true and fair view principle. EFRAG has then assessed whether IFRIC 22 would be conducive to the European public good.

Does IFRIC 22 meet the IAS Regulation technical endorsement criteria?

Based on the above reasoning, EFRAG has concluded that IFRIC 22 meets the qualitative characteristics of relevance, reliability, comparability and understandability required to support economic decisions and the assessment of stewardship, and leads to prudent accounting. EFRAG has also assessed that IFRIC 22 does not create any distortion in its interaction with other IFRS and that all necessary disclosures are required. Therefore, EFRAG has concluded that IFRIC 22 is not contrary to the true and fair view principle.

EFRAG's overall preliminary assessment is that IFRIC 22 satisfies the criteria for endorsement for use in the EU and therefore recommends its endorsement.

EFRAG is seeking comments on all aspects of its analyses supporting its preliminary conclusions. Comments are requested by 17 March 2017.

Full press release

Draft endorsement advice

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