BC53 The IASB decided that when one currency is not exchangeable into another currency at a measurement date, an entity estimates the spot exchange rate at that date. The objective in paragraph 19A of the Standard is for an entity to estimate the rate at which an orderly exchange transaction hypothetically would take place at the measurement date between market participants under prevailing economic conditions. This approach is similar to (although not the same as) an entity measuring an asset or liability at fair value by estimating the price at which an orderly transaction to sell the asset or transfer the liability hypothetically would take place at the measurement date.

BC54 The IASB decided not to provide any detailed requirements on how an entity estimates a spot exchange rate because:

(a) estimating a spot exchange rate can be complicated and depends on entity-specific and jurisdiction-specific facts and circumstances.

(b) the economic models an entity might use to estimate a spot exchange rate are varied. These models vary in complexity and in the economic factors they use as inputs (for example, inflation, interest rates, the balance of payments or a jurisdiction’s productivity). The IASB decided not to prescribe one particular estimation technique or approach because that technique or approach would be unlikely to capture all relevant factors for all possible situations without being overly burdensome.