The Australian Accounting Standards Board (AASB) on May 13 proposed to amend AASB 121 “The Effects of Changes in Foreign Exchange Rates” to provide companies guidance on accounting requirements that apply when a company reports foreign transactions in a currency that cannot be exchanged.
When reporting foreign transactions and results of foreign operations, companies generally must use the spot exchange rate. However, there are currently no rules addressing accounting requirements when a currency is not exchangeable.
The amendments would clarify how to determine when a currency is exchangeable into another currency. In the case of a currency that is not exchangeable, the amendments would specify how an entity determines the exchange rate to apply. The amendments would also describe the information an entity must provide when a currency is not exchangeable.
The AASB proposal follows and would adopt parallel amendments concurrently being proposed by the International Accounting Standards Board (IASB). The AASB will take into account comments it receives on the proposal in formulating its own comments to the parallel IASB proposal.
The AASB is requesting comments by July 23.
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