IFRS IC consultation on the classification of foreign exchange differences from intragroup loans and borrowings under IFRS 18

In transactions between a parent company and a subsidiary with different functional currencies, exchange differences may arise. Upon consolidation, in accordance with IFRS 10 and IAS 21, these transactions are eliminated, but the exchange difference remains in the consolidated statement of profit or loss. 

The IFRS Interpretations Committee (IFRS IC) was asked to determine which category these residual exchange differences should be allocated to in the case of intra-group loans and borrowings. 

The meeting on 16 September discussed two views: 

• classify these exchange differences in the Operating category as the default category under the standard, since the income and expenses that gave rise to them have been eliminated on consolidation; 
• classify the exchange difference in the same category in which the income and expenses from the intragroup loan would have been classified before their elimination on consolidation, or, if doing so would involve undue cost or effort, in the Operating category. 

Seven Committee members concluded that the first view was the only reasonable interpretation of paragraph B65 of IFRS 18. 

The other seven Committee members concluded that both views were reasonable interpretations of paragraph B65 of IFRS 18. 

The Committee tentatively decided not to add these questions to the IASB work plan. 

The period for feedback on this tentative decision is open until 25 November 2025 (available here).