On 24 November 2005, the International Financial Reporting Interpretations Committee (IFRIC) published IFRIC Interpretation 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies, hereinafter ‘IFRIC 7’. IFRIC 7 clarifies the requirements under IAS 29 Financial Reporting in Hyperinflationary Economies relating to issues that companies had regarding how a company should restate its financial statements pursuant to IAS 29 in the first year it identifies the existence of hyperinflation in the economy of its functional currency.

On 15 December 2005, the International Accounting Standards Board (IASB) issued Amendment to IAS 21 The Effects of Changes in Foreign Exchange Rates — Net Investment in a Foreign Operation, to clarify its requirements regarding an entity's investment in foreign operations. Companies had raised concerns relating to loans that form part of a company's investment in a foreign operation as IAS 21 included provisions requiring the loan to be denominated in the functional currency of either the company or the foreign operation in order that the exchange differences arising could be recognised in the equity section of the consolidated financial statements. However, in practice the loan may be denominated in another (third) currency. The IASB concluded that it had not intended to impose this restriction, therefore published this amendment to permit the loan to be denominated in a third currency.

The consultation with technical experts in the field confirm that IFRIC 7 and the Amendment to IAS 21 meet the technical criteria for adoption set out in Article 3(2) of Regulation (EC) No 1606/2002.

Regulation (EC) No 1725/2003 should therefore be amended accordingly.

The measures provided for in this Regulation are in accordance with the opinion of the Accounting Regulatory Committee,