4.7 Refundable Deposits and Advances

Refundable deposits and advances (both amounts received from customers and amounts paid to suppliers) are monetary liabilities and assets. Therefore, if the amounts are refundable in a foreign currency, the recognized asset or liability must be remeasured in the functional currency on each reporting date at the current exchange rate.

ASC 606 does not directly address whether a refund liability should be considered a monetary liability. In determining whether a refund liability is a contract liability, an entity will need to use judgment and consider the specific facts and circumstances. This determination will affect whether the refund liability would be considered a monetary or nonmonetary liability. Refund liabilities that are not contract liabilities represent monetary liabilities that must be remeasured by using current exchange rates.