IAS 21 and NIF B-15: how to record foreign currency transactions
IAS 21 in Colombia and NIF B-15 in Mexico share one logic: set the functional currency, recognize each transaction at the rate of its date, and retranslate only monetary items. This guide covers the standard and where the two differ.
A company that bills in dollars and pays costs in pesos soon faces the same two questions: what is its functional currency, and at what rate does each transaction enter the books? Getting this wrong distorts reported results even when cash has not moved.
In Soulbit Academy we explain the standard behind that record. IAS 21 governs Colombia through IFRS and NIF B-15 governs Mexico. This article covers the standard itself: functional currency, initial recognition, monetary and non-monetary items, translation and differences. The monthly procedure is in functional versus presentation currency at the monthly close, and the choice of rate is in the Colombian TRM and the DIAN.
IAS 21 and NIF B-15: where each standard applies and what it covers
IAS 21 applies in Colombia to Group 1 entities, which use full IFRS, and NIF B-15 applies in Mexico to entities that report under the CINIF's Normas de Información Financiera. Both cover two matters: how foreign currency transactions are recognized, and how financial statements are translated into another currency.
In Colombia, Group 2 entities apply IFRS for SMEs, whose Section 30 treats the same subject with an equivalent logic. SMEs with 10 to 100 employees often fall in that group, but classification follows the criteria of Decree 2420 of 2015, so confirm it with your accountant before choosing the standard.
What does the foreign currency standard actually regulate?
Three chained decisions. The first is the functional currency. The second is how each transaction is recognized and how its balances are treated at every reporting date. The third is how results and financial position are translated into the currency in which the statements are presented. Each has its own rule, and they should not be mixed.
Functional currency: how it is determined and why it is not a free choice
Functional currency is the currency of the primary economic environment in which the entity operates, and it is set by facts, not preference. The usual indicators are the currency that influences selling prices, the one that influences labor and material costs, and the one in which cash flows are generated and retained.
IAS 21 (paragraphs 9 to 11) and NIF B-15 list indicators of the same kind; check the current text of each standard. When the indicators point in different directions, management applies judgment and must document it.
An example shows the problem. A Colombian SME selling software services to US clients invoices in dollars, but pays payroll, rent and taxes in pesos. The indicators split: prices point to the dollar and costs to the peso. There is no automatic answer, which is why the conclusion must be in writing, with the facts behind it.
Functional currency is not the currency of the invoices or of the place where cash is held. Once set, it is applied consistently and changes only if underlying conditions change, prospectively. Presentation currency, by contrast, can be chosen.
Can a Colombian company have the dollar as its functional currency?
Yes, if the facts support it. The standard does not stop an entity located in Colombia from having a functional currency other than the peso. What it does not allow is deciding it for convenience, because everything downstream changes. For tax purposes, the DIAN and the SAT follow their own rules, which this article does not cover.
Initial recognition: the rate on the date of the transaction
A foreign currency transaction is recognized at origin by converting the amount into the functional currency at the exchange rate of the transaction date. IAS 21 calls it the spot rate. NIF B-15 says the same and applies it to the recording currency.
The distinction between recording currency and functional currency belongs to the Mexican standard. Recording currency is the one in which the entity keeps its books. If it differs from the functional currency, amounts are first converted to functional and then, where relevant, to the reporting currency. If the books are kept in the functional currency, the intermediate step disappears.
Monetary and non-monetary items: what is retranslated and what is not
After initial recognition, only monetary items are retranslated at the closing rate, and the differences go to profit or loss. A monetary item is a right to receive, or an obligation to deliver, a fixed or determinable number of currency units: cash, receivables, payables and loans.
Non-monetary items at historical cost keep the rate of their acquisition date. That covers inventory, property, plant and equipment, and prepayments settled with goods or services. If a non-monetary item is measured at fair value, it is translated at the rate of the date that value was determined.
Table 1 sorts the most common items for an SME with dollar operations.
| Item | Type | Rate applied at the reporting date | Where the difference goes |
|---|---|---|---|
| Foreign currency cash and balances | Monetary | Closing rate | Profit or loss |
| Foreign currency receivables and payables | Monetary | Closing rate | Profit or loss |
| Foreign currency loans | Monetary | Closing rate | Profit or loss |
| Inventory bought at cost | Non-monetary | Historical rate | None arises |
| Property, plant and equipment at cost | Non-monetary | Historical rate | None arises |
| Prepayments settled with goods or services | Non-monetary | Historical rate | None arises |
Where is the difference on monetary items recorded?
In profit or loss of the period in which it arises. In Mexico it is commonly called a foreign exchange fluctuation; in Colombia, an exchange difference.
Example with assumptions
The amounts below are teaching assumptions, not market figures or Soulbit prices. A company books a receivable of USD 10,000 when the rate is COP 4,000 per dollar. At month end the rate is 4,100. When the client pays, the rate is 4,050.
At recognition the receivable is COP 40,000,000. At month end it is retranslated to 41,000,000 and a gain of 1,000,000 is recognized. On collection the balance equals 40,500,000, so a loss of 500,000 is recognized. The cumulative effect is a gain of 500,000, split across two periods.
Translation into the presentation currency: when it happens and how
Translation into the presentation currency is a separate step from retranslating monetary items, and it only happens when the functional currency differs from the currency in which statements are presented. With a peso functional currency and peso statements, there is no translation. With subsidiaries or owners in another currency, there is.
In a non-hyperinflationary environment the mechanics are the same in both standards. Assets and liabilities are translated at the closing rate. Income and expenses are translated at the rate of each transaction date, and a weighted average is accepted if rates do not move significantly. Equity is translated at the historical rate.
The result of that translation does not go through the income statement. Under IAS 21 it accumulates in other comprehensive income and a reserve in equity. Under NIF B-15 it accumulates in equity as the cumulative translation effect. The balance is transferred to profit or loss when the entity disposes of its investment in the foreign operation.
The difference on a receivable affects profit or loss, and the difference from translating statements affects equity. To see how results read with two currencies, see how to read an income statement in two currencies and, for the position, the balance sheet with dollar assets and liabilities.
Differences between IAS 21 and NIF B-15, and what changed in 2025
IAS 21 and NIF B-15 share the substance and differ mostly in vocabulary, structure and update calendar. Table 2 summarizes where an accountant moving between the two should pay attention.
| Aspect | IAS 21 (Colombia, Group 1) | NIF B-15 (Mexico) |
|---|---|---|
| Currencies it defines | Functional and presentation | Recording, functional and reporting |
| Initial recognition | Spot rate of the transaction date | Rate of the transaction date |
| Monetary items at period end | Closing rate, difference to profit or loss | Closing rate, difference to profit or loss |
| Effect of translating statements | Other comprehensive income and equity reserve | Cumulative translation effect in equity |
| Inflationary environment | Refers to the hyperinflation standard | Recognizes inflation first under the relevant NIF, then translates |
| Term for the difference | Exchange difference | Foreign exchange fluctuation |
The most relevant recent change is the amendment on non-exchangeable currencies, those that cannot be exchanged for another under normal conditions. The IASB issued it on 15 August 2023 as an amendment to IAS 21, effective for annual periods beginning on or after 1 January 2025, with early application permitted. It explains how to assess whether a currency is exchangeable and how to estimate the rate when it is not, with new disclosures.
In Colombia, Decree 701 of 2026 incorporated the amendment into the Group 1 framework. It was published in the Official Gazette on 8 July 2026 and applies from the following day, 9 July 2026, under Article 5. The international 2025 effective date is not the Colombian application date. The Group 2 changes concern Sections 29 and 35, not currency translation.
In Mexico, the CINIF's 2025 Improvements to the NIF added rules to NIF B-15 for assessing exchangeability, estimating the exchange rate and disclosing the effects. The transitional provision applies them to financial years beginning on or after 1 January 2025, with early application permitted for 2024.
Does this amendment affect an SME operating in dollars and pesos?
In practice, almost never. The dollar and the Colombian or Mexican peso are exchangeable in the market, so the amendment does not change day-to-day recording. It matters for those operating in jurisdictions with severe currency controls, where the other currency cannot be obtained under normal conditions.
If the company holds USDC balances, the first question is whether the balance is a foreign currency for these standards, and that classification is not settled as clearly as a traditional dollar balance. The guide to accounting for USDC under IFRS walks through the reasoning. The foreign currency standard comes into play only if the classification concludes the balance is a foreign currency item.
What Soulbit's V1 delivers and what it does not
Soulbit is a treasury and payments platform with institutional MPC custody. The V1 includes USDC and USDT balances, conversion through eOTC (OTC exchange by quote), mass payroll disbursement in stablecoin, local Colombian banking rails, payment links and collection QR codes, KYB, AML/KYT monitoring and human support.
What Soulbit does not do matters here. It does not determine your functional currency, apply IAS 21 or NIF B-15, calculate exchange differences, choose the accounting rate, or replace your accountant or statutory auditor. Nor does it settle the accounting classification of a stablecoin balance. Those decisions remain with the company and its adviser.
If your company receives payments from Mexico, you can also read how to receive international payments in USDC in Mexico.
Frequently asked questions
What is IAS 21 and who applies it in Colombia?
IAS 21 is the international standard on the effects of changes in foreign exchange rates. In Colombia it applies to Group 1 entities, which use full IFRS. Group 2 entities use IFRS for SMEs, whose Section 30 covers foreign currency translation with an equivalent logic. Confirm your group with your accountant.
What is NIF B-15 and how does it differ from IAS 21?
NIF B-15 is the Mexican standard on translation of foreign currencies, issued by the CINIF and in force since 2008. It shares the substance of IAS 21 but adds the concept of recording currency and refers to a cumulative translation effect in equity. The vocabulary differs more than the accounting outcome.
What is functional currency and how is it determined?
Functional currency is the currency of the primary economic environment in which the entity operates. It is judged from indicators such as the currency that drives selling prices, the currency of costs and the currency of cash flows. It is not chosen for convenience: it is a conclusion that must be documented and changes only if circumstances change.
Which items are retranslated at the closing rate and which are not?
Monetary items are retranslated at the closing rate: foreign currency cash, receivables, payables and loans. Non-monetary items measured at historical cost, such as inventory or property, plant and equipment, keep the rate of the transaction date. The difference on monetary items goes to profit or loss.
Does Soulbit do the foreign currency accounting for my company?
No. Soulbit is a treasury and payments platform: it does not determine functional currency, apply IAS 21 or NIF B-15, or replace your accountant. It moves and holds the balances; the company decides the accounting treatment with its adviser.
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