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Transacting for Fx.

I'm looking for some very simple guidance on how to properly record Fx from month to month.  (Yes, I've read FAS52.)

Scenarios (in all instances the reporting currency is USD at the consolidated level):

 

  • USD Entity, with GBP and EUR bank accounts.  We revalue the accounts to the equivalent USD amount based on EOM rates.  Is this a current period P&L gain or loss, or an unrealized gain/loss carried in the balance sheet?
  • Similarly on the USD books, we have A/R and A/P represented in foreign currencies.  Should the entry to revalue the foreign denominated amounts be against the P&L, or to the balance sheet?

Historically, we've been adjusting through a balance sheet account titled "Unrealized Fx Gain/Loss" and P&L impact has been recorded when transactions settle.

Answers

Ken Stumder
Title: Finance Director / Controller
Company: Ken Stumder, CPA
(Finance Director / Controller, Ken Stumder, CPA) |

Obviously I needed to pay closer attention; did a quick re-read. It's P&L regardless of whether it's realized/unrealized. Now off to the more interesting topics...

Topic Expert
Jake Feldman
Title: Managing Director
Company: Global TaxFin Advisory Group LLC
(Managing Director, Global TaxFin Advisory Group LLC) |

Hi Ken,

A simple web search will turn up numerous hits describing exchange gain/loss accounting. However, by coincidence there's a recent article in the Journal of Accountancy below that may be helpful.

http://www.journalofaccountancy.com/Issues/2012/Feb/20113891.htm

Jake

Ken Stumder
Title: Finance Director / Controller
Company: Ken Stumder, CPA
(Finance Director / Controller, Ken Stumder, CPA) |

Jake - many thanks. Coincidentally, our CFO came in with his print edition of JOA and mentioned the very same article!

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