Foreign Currency Transactions

Question 1

Exchange rate used for assets and liabilities

Answer 1

Spot rate at the balance sheet date

Question 2

Exchange rate used for revenues, expenses, gains, and losses

Answer 2

Average rate (or appropriately weighted-average exchange rate for the period)

Question 3

Forward contracts - recording gain/loss

Answer 3

Gain/loss is computed as difference between the foreign currency amount of the forward contract rate per settlement and the forward contract rate at time of measurement. Gain/loss should be included in net income

Question 4

Where do foreign currency exchange adjustments get reported?

Answer 4

They are not included in determining net income but are reported sepaoand accumulated in a separate component of equity.

If netted out to a loss, reported as stockholders equity contra account.

This concerns g/l resulting from translation.

Remeasurement g/l are included in net income.