Chapter 5 FOREX Transaction
Chapter 5 FOREX Transaction
1. Sales prices for goods and services are denominated and settled.
2. The currency of competitive forces and regulations.
3. the currency that mainly influences labor, material and other costs.
Factors that provide evidence of an entity’s functional currency:
Note:
When the above indicators are mixed and the functional currency
is not obvious, management uses its judgment to determine the
functional currency that most faithfully represents the economic
effects of the underlying transactions, events and conditions
once determined, the functional currency is not changed unless
there is a change in those underlying transactions, events and
conditions.
FOREIGN CURRENCY IMPORT AND
EXPORT TRANSACTIONS
1. Transaction date: Record the purchase or sale transaction at the
Local Currency Units using the spot direct exchange rate on this
date.
2. Balance sheet date: Adjust the payable or receivable to its Local
Currency Units, end-of-period value using the current direct
exchange rate.
• Recognize any exchange gain or loss for the change in rates
between the transaction and balance sheet dates.
3. Settlement date: Adjust the foreign currency payable or
receivable for any changes in the exchange rate between the balance
sheet date (or transaction date) and the settlement date, recording
any exchange gain or loss as required.
• Record the settlement of the foreign currency payable or
receivable
EXAMPLE 1