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 ASC 606
contract liabilities represent monetary liabilities that must be
remeasured by using current exchange rates.