ASB Notice to constituents
Request for comments on
IASB proposed change to IAS 21 and ASB proposed change to FRS 23
3 October 2005
On 30 September 2005 the IASB issued its first draft Technical Correction:
‘DTC1: Proposed Amendments to IAS 21 The Effects of Changes in Foreign Exchange
Rates Net Investment in a Foreign Operation’.
In accordance with the IASB’s draft policy on Technical Corrections,
published on 28 July 2005, and open for comment until 30 September, Technical
Corrections are intended to provide a ‘fast track’ process for changing accounting
standards where it is clear that the words in a standard do not properly convey the
IASB’s intention, even when considered with the Basis for Conclusions and any
related guidance. A Technical Correction may also address unexpected
consequences of a standard that the IASB would have corrected, had it been aware of
them when the standard was issued.
If IASB’s proposed Technical Corrections policy is finalised in its present form
ASB envisages that future Technical Corrections would be reflected in UK standards
following a consultation similar to the present one. ASB will, as soon as possible
after publication of each proposed Technical Correction:
draw attention to the IASB’s proposals for a Technical Correction;
indicate whether it considered a parallel change should be made to a UK
seek views from its constituents.
When the final Technical Correction is issued the ASB would, after consideration of
the views received, amend the corresponding UK standard.
The proposals in DTC1 would amend one aspect of IAS 21. This standard
requires exchange differences arising on a company’s net investment in a foreign
operation to be reported in equity (and ‘recycled’ to profit and loss account on the
subsequent disposal of that investment). The ‘net investment’ may include loans
between the company and its foreign operation, provided certain conditions are met.
Under the current requirem