My blog posting of 9 March 2006 “Can you still account in foreign currency?” and the related response to a reader’s comment explained that in certain cases the rules in IFRS and in FRS 23 for determining functional currency would create difficulties for groups of companies. I concluded:
“This problem, namely that IFRS and new UK GAAP make it much more difficult to account in foreign currency in straightforward situations, has been raised by our firm with HM Revenue & Customs. As the mandatory implementation of FRS 23 is still some months away, only a limited amount of attention has so far been given to this problem. However, the problem will become urgent if the ASB adheres to the original deadline of FRS 23 being mandatory for all UK companies for accounting periods commencing on or after 1 January 2007.”
While the posting concentrated on UK parented groups, the issue applies also to foreign parented groups, where one can find that the top UK holding company, which has historically accounted in sterling, has a foreign functional currency under IFRS/FRS 23.
Since then, the ASB has delayed the mandatory adoption of FRS 23 to 1 January 2009 at the earliest, which has deferred the impact date. However, there is no agreed solution yet. Meanwhile my colleagues Ken Howlett and Derek Jenkins have continued to have discussions with HMRC, as have others.
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