BDO submits comment letter: Classification of Monetary Intragroup Foreign Exchange Difference

BDO submitted its comment letter on the IFRS Interpretation Committee’s (the Committee) Tentative Agenda Decision: Classification of a Foreign Exchange Difference from an Intragroup Monetary Liability (or Asset) (IFRS 18 Presentation and Disclosure in Financial Statements).

This Tentative Agenda Decision highlights two views on how to classify the foreign exchange differences from an intragroup monetary liability or asset in the statement of profit or loss per IFRS 18.
  • View I – Classification in the operating category (default category)
  • View II – Classification in the same category in which the income and expenses from the intragroup loan would have been classified before their elimination on consolidation unless doing so would involve undue cost or effort (in this case classified in the operating category).
BDO highlights that although both approaches outlined in the decision are technically supportable conclusions, the application of View II may result in additional application questions. BDO recommends that the Committee should conclude how the requirements of IFRS 18 apply to this fact pattern and if the Committee is unable to reach a conclusion, BDO further recommends that the International Accounting Standards Board (IASB) should consider fast-tracked, narrow-scope standard setting to IFRS 18 to clarify the requirements.

The comment letter may be accessed here.