As part of convergence with IFRS Standard, on November 01, 2023, the Accounting Standard Board of the Institute of Chartered Accountants of India (ICAI) issued an exposure draft on Lack of Exchangeability (Amendments to Ind AS 21 The Effects of Changes in Foreign Exchange Rates) (the amendments).
Ind AS 21 sets out the exchange rate that an entity uses when it reports foreign currency transactions in the functional currency, presents financial statements in a different currency, or translates the results of a foreign operation in a different currency. Until now, Ind AS 21 sets out the exchange rate to use when exchangeability between two currencies is temporarily lacking, but not what to do when lack of exchangeability is long-term and has not been restored after the end of the reporting period.
The proposed amendment objectives are to improve the usefulness of information provided to investors and to reduce the diversity in practice by requiring companies to apply a consistent two-step approach.
Timeline: Proposed amendments shall be effective for annual reporting periods beginning on or after April 01, 2025, with early application permitted.