03/06/2021 - EFRAG's Draft Comment Letter on the IASB Exposure Draft ED/2021/4 Lack of Exchangeability (proposed amendments to IAS 21)

On 20 April 2021 the IASB issued Exposure Draft ED/2021/4 Lack of Exchangeability (proposed amendments to IAS 21).

The ED adresses the missing guidance in IAS 21 with regard to situations where a foreign currency has a non temporary lack of exchangeability. The ED proposes to amend IAS 21 The Effects of Changes in Foreign Exchange Rates to establish guidance for such situations. More specifically the IASB's proposed guidance helps to determine when a currency is exchangeable into another currency and when not, as well as how an entity determines the applicable exchange rate when a currency is lacking exchangeability. The amendment also proposes disclosures that an entity is required to provide when a currency is not exchangeable.

In the Draft Comment Letter, EFRAG supports the proposal to set up principles-based guidance for determining a lack of exchangeability. EFRAG also supports the IASB`s intention not to prescribe on a detailed method to determine an estimated exchange rate. The proposed guidance will help to reduce diversity in practice and gives entities clarity about how to handle the problem appropriately.

However, EFRAG suggests some improvements to the application guidance, e.g., to clarify examples and to add more examples on how to determine the estimated exchange rate in practice. The Draft Comment Letter also contains questions to constituents that should provide EFRAG with more insights on current accounting practice for such situations.  

The Draft Comment Letter is available here​.

EFRAG requests comments on its Draft Comment Letter by 26 August 2021. 

You can comment on EFRAG's Draft Comment Letter by clicking on the 'Comment publication' link below.