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Foreign currency based financials

I have a US client who has an office in mexico - this company is using great plains and the functional currency is US They enter a majority of their entries for AP and AR in pesos and have both US and Pesos checkbooks They are required to restate their financials in pesos on a monthly basis The question is: do I revalue all the monetary accounts - pesos entries for cash, AP and AR to US as of the month end and generate the unrealized gain or loss Then translate the monetary cash, AP AR to pesos using the spot rate and the fixed assets and retained earnings using the historic rate? In other words: do I first revalue to US then perform the translation to pesos? If you could clarify the very last question that would help me immensely

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

The Mexican entity should have all amounts in Peso's.

From an EisnerAmper on-line report:

"Monthly you should restate accounts per GAAP. "Financial Accounting Statement No. 52, Foreign Currency Translation (FAS 52), sets forth the appropriate accounting treatment under U.S. GAAP. Companies reporting under International Financial Reporting Standards (IFRS) are subject to International Accounting Standard No. 21, The Effects of Changes in Foreign Exchange Rates (IAS 21), which is substantially similar to FAS 52. "

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

My understanding of your question is 1) you have USD books where all peso transactions are revalued at period end and 2) you need MXN statutory books. If that is your question you can take your USD books and convert the monetary items back into MXN taking the change to P&L (which should offset the gain/loss that you had on the USD books). The non-monetary items need to be converted at the historical USD/MXN rate when put on the books. The non-monetary related P&L items (i.e. depreciation should be converted using that same USD/MXN rate.

In brief, if you take MXN monetary items to USD and hit the P&L, then turn around and take the USD into MXN using the same rates you should end up with no P&L for the MXN monetary assets and liabilities when you consolidate the USD remeasurement results with the MXN remeasurement results. Remaining amounts should represent the FX on any USD (or other non-MXN) monetary items.

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

Your first sentence is confusing. If the functional currency is USD, then the only gain/loss you will have is when you settle payments and this would be f/x gains or losses.

Wayne mentions FAS 52 or now known as ASC 830 to evaluate this. You should use the guindance to determine if the USD or Peso is your functional currency for Mexico.

If this step says that the Peso is your functional currency, then you will have f/x gains losses based on traslating from Peso's to USD.

Kevin Roones
Title: Senior Accounting Professional
Company: In-between
(Senior Accounting Professional, In-between) |

It sounds like you are confusing the functional currency with the reporting currency. If most of the transactions at the Mexican office are in pesos and the majority of their bank balance is pesos then pesos are more than likely the functional currency for them. The U.S. office would need to translate the Mexican office's books to U.S. dollars if that is their reporting currency on a consolidated basis.

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