Foreign Operations Flashcards
Foreign Currency Transactions
A transaction that will be settled through the payment or receipt of foreign currency, recognized in the functional currency using the exchange spot rate
Spot Rate
The rate that is effective on a particular date
Functional Currency
The currency that has the greatest economic impact on the entity’s financial performance. Generally it’s the local currency
Transactional Currency
Local
currency of a particular company
usually what the books and records are kept in
Functional Currency
Greatest Economic impact on the company
Reporting Currency
Currency in which the entity prepared it’s financial statements (US in most cases)
Remeasured
when a transaction takes place in something other than the functional currency it’s remeasured as if it had taken place in the functional currency
Difference between transactional and functional
goes on Income statement
Functional=Reporting
Translated
when the functional currency is not the same as what’s used for reporting amounts are translated from the functional currency to the reporting currency
Difference between functional and reporting
goes on balance sheet
Functional=Reporting
Functional=Transactional
Payable or receivable in foreign currency
remeasured at each balance sheet date reported as income or loss on foreign currency transaction gain or loss
Foreign Exchange Contract
agree to exchange one currency for another at a specific rate at a specific time in the future
Reported at fair value with gains/losses on the income statement
Hedge
Forward Rate
what the rate is expected to be at a future date
Translation Rates
Assets/Liab-current rate
income statement-weighted average
Contributed Capital-historical
Remeasurement Rates
Monetary Assets/liab-current
Non-monetary Assets/liab-historical
Income Statement-weighted average
