Foreign Exchange - Capitalisation of Losses Resulting from Severe Currency Devaluations (SIC-11)
An Interpretation of IAS 21, The Effects of Changes in Foreign Exchange Rates
- Issued July 1998.
- Effective date: 1 August 1998.
The Allowed Alternative Treatment in IAS 21.21 requires several conditions to be met cumulatively before an enterprise can include exchange losses on foreign currency liabilities in the carrying amount of related assets. The issue is how the conditions of IAS 21.21 should be interpreted that the liability "cannot be settled" and that there is "no practical means of hedging" against the foreign currency exchange risk and that the liability should arise on the "recent acquisition" of an asset. The SIC agreed that foreign exchange losses on liabilities that result from the recent acquisition of assets should only be included in the carrying amount of the assets if those liabilities could not have been settled or if it was not practically feasible to hedge the foreign currency exposure before the severe devaluation or depreciation occurred. Only in these cases foreign exchange losses are unavoidable and therefore part of the asset's acquisition costs. "Recent" acquisitions of assets are acquisitions within twelve months prior to the severe devaluation or depreciation of the reporting currency.
Note: Please note that these summaries are only for reference purposes and are not a substitute for the entire SIC. Kindly read the whole text of SIC before consulting these summaries.
Summaries are courtesy of Deloitte.
More SIC Summaries
- SIC-01 - Consistency - Different Cost Formulas for Inventories
- SIC-02 - Consistency - Capitalisation of Borrowing Costs
- SIC-03 - Elimination of Unrealised Profits and Losses on Transactions with Associates
- SIC-05 - Classification of Financial Instruments - Contingent Settlement Provisions
- SIC-06 - Costs of Modifying Existing Software
- SIC-07 - Introduction of the Euro
- SIC-08 - First-Time Application of IASs as the Primary Basis of Accounting
- SIC-09 - Business Combinations - Classification either as Acquisitions or Unitings of Interests
- SIC-10 - Government Assistance - No Specific Relation to Operating Activities
- SIC-11 - Foreign Exchange - Capitalisation of Losses Resulting from Severe Currency Devaluations
- SIC-12 - Consolidation - Special Purpose Entities
- SIC-13 - Jointly Controlled Entities - Non-Monetary Contributions by Venturers
- SIC-14 - Property, Plant and Equipment - Compensation for the Impairment or Loss of Items
- SIC-15 - Operating Leases - Incentives
- SIC-16 - Share Capital - Reacquired Own Equity Instruments (Treasury Shares)
- SIC-17 - Equity - Costs of an Equity Transaction
- SIC-18 - Consistency - Alternative Methods
- SIC-19 - Reporting Currency - Measurement and Presentation of Financial Statements Under IAS 21 and IAS 29
- SIC-20 - Equity Accounting Method - Recognition of Losses
- SIC-21 - Income Taxes - Recovery of Revalued Non-Depreciable Assets
- SIC-22 - Business Combinations - Subsequent Adjustment of Fair Values and Goodwill Initially Reported
- SIC-23 - Property, Plant and Equipment - Major Inspection or Overhaul Costs
- SIC-24 - Earnings Per Share - Financial Instruments that May Be Settled in Shares
- SIC-25 - Income Taxes - Changes in the Tax Status of an Enterprise or its Shareholders
- SIC-27 - Evaluating the Substance of Transactions in the Legal Form of a Lease
- SIC-28 - Business Combinations - 'Date of Exchange' and Fair Value of Equity Instruments
- SIC-29 - Disclosure – Service Concession Arrangements
- SIC-30 - Reporting Currency – Translation from Measurement Currency to Presentation Currency
- SIC-31 - Revenue – Barter Transactions Involving Advertising Services
- SIC-32 - Intangible Assets – Website Costs
- SIC-33 - Consolidation and Equity Method - Potential Voting Rights and Allocation of Ownership Interests