A foreign-currency transaction is one that requires settlement, either payment or receipt, in a foreign currency. When the exchange rate ofrex between the original purchase or sale transaction date and the settlement date, there is a gain or loss on the exchange. Whoever views the denominated currency (the currency acounting transaction takes place in) as the foreign currency takes the gain or loss.
Companies that make many foreign-currency transactions may buy a forward currency contract to get a guaranteed rate. It is not really because of a complex subject—at least it is not as complex as cost accounting. It was merely because of I have less interest in foreign currency accounting matter, until I joined a multi-national group of company that involves forex transactions accounting depreciation transactions with customers and across the group.
AdvertisementThe tansactions before dealing with multi-currency transactions for the first time, I went to a bookstore, grabbed a GAAP book and read it overnight. It was not because transactioms my professor did not teach me qccounting is the most smart (and strict) professor I ever knew. Foreign currency transactions may result in receivables or payables fixed in the amount of foreign currency to be received or paid. A foreign currency transaction requires settlement in a currency other than the functional currency.
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Forex transactions accounting depreciation