Foreign Currency Transactions

Question 1

How do transactions denominated in in a currency other than a company’s functional currency affect the income statement?

Answer 1

Fluctuations in that currency cause a gain or loss that must be recognized on the income statement as Income from Continuing Operations

Question 2

What causes a Foreign Currency Transaction G/L?

Answer 2

A change in exchange rates between the functional currency and the transaction currency

Question 3

Where are Foreign Currency Transaction G/L recorded?

Answer 3

Income Statement

Question 4

Where are Foreign Currency Translation G/L recorded?

Answer 4

OCI

Question 5

If the Functional Currency equals the Local Currency - what rate is used for translating Assets and Liabilities?

Answer 5

Current Rate as of the Balance Sheet Date

Question 6

If the Functional Currency equals the Local Currency - what rate is used for translating Revenues and Expenses?

Answer 6

Weighted Average Exchange Rate for the year

Question 7

If the Functional Currency equals the Reporting Currency - what Exchange Rate is used??

Answer 7

Use Weighted Average - Historical Exchange Rates (Inventory and Pre-paid Assets and Property Plant and Equipment) and Current Exchange Rates (Monetary Assets and Liabilities and Inventory @ Market and Trading Securities and Deferred Taxes)