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How do you record a fixed asset that was purchased in a foreign currency?

We agreed to purchase an asset in EUR. We paid a deposit a year ago and then several payments this year. Each time we paid the rate was different for the EUR we paid. Do we need to recognize any gain or loss due to currency fluctuations? Or due we just record it net? Whatever the US amount was each time and forget about the cost of exchanging the currency?


Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

What did the purchase agreement for the asset state about taking ownership vs the timing of payments to settle the purchase price?
What was the asset? Intangible, used in production?

Helen Kane
Title: President
Company: Hedge Trackers, LLC
(President, Hedge Trackers, LLC) |

Fixed assets are recorded in functional currency at the rate when received. However, in your case you prepaid some or all of the equipment therefore the equipment will be at the weighted average rate of the prepayments, including the rate at time of receipt for any unpaid portion. The only fx gain or loss will be related to the payable on any amount that was not paid at receipt. Fixed assets are not monetary assets or liabilities.

Allan Kaplan
Title: CFO
Company: Euclid Systems Corporation
(CFO, Euclid Systems Corporation) |

When the liability was fixed and determinable (or for each portion with regards to prepayment, at the date that liability was 'put on the books') the rate applicable at that time is used to establish the debit (either to prepaid or to the asset). The credit (liability in payables) then is subject to fx risk until paid, so you recognize fx gain/loss until actually paid.

If the full accrual for the liability is up front, then you realize fx gain/loss as payments are made. If the liability is due in stages (depends on how the contract reads and your accounting treatment), then you have shorter FX risk periods.


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