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Double Counting Foreign Currency Translation

Hi, I'm in the process of translating a USD entity into GBP and have come up with a Foreign currency translation reserve (FCTR) amount which makes sense. The calculation is all off line on an Excel file. Intuitively (to avoid double counting) it seems I should reverse the historic FCTR balance which is included in retained earnings, but I'm unable to find documentation to support this argument. A few articles talk about the cumulative build up of FCTR which would indicate it is not reversed. Can you please clarify this potential double counting concern I have. Thanks, Margaret

Answers

alpha diallo
Title: vp finance
Company: monarch
(vp finance, monarch) |

Please indicate the guidance under which the initial CTA was performed under. I am guessing the local currency is the USD and the reporting currency is GBP. The CTA in the balance sheet suggest that the translation method was employed; therefore it is reversed only upon a transaction. If you want to change the measurement method, then I suggest that you discuss it with your auditors.

Margaret Carey (ACMA)
Title: Business Development
Company: Raida solutions
LinkedIn Profile
(Business Development, Raida solutions) |

Hi Alpha,
I'm using the closing rate method when translating monthly management accounts. Your response clarifies the issue in that the build up is reversed once the assets/liabilities are liquidated and there is a net fx gain/loss remaining in reserves of which FCTR /CTA is a component.

Margaret Carey (ACMA)
Title: Business Development
Company: Raida solutions
LinkedIn Profile
(Business Development, Raida solutions) |

Thanks for your help. Margaret

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