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ilysaml
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| Posted: 14 May 2016 at 07:01 | IP Logged
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At the end of F2 in Becker, they explained the foreign
transactions resulting from individual transactions
based on importing, exporting lending or borrowing that
result in a receivable or payable, what would be the
case if a US. entity had a monetary asset "cash" in a
bank account in a currency different than the local
currency, eg: Euros, how would that cash account be
reported in the B/S using what method of translation? Is
it considered a foreign transaction too?
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nambivar
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| Posted: 14 May 2016 at 23:02 | IP Logged
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ilysaml
Is your question: a US based reporting entity has a bank account in euros; how will that balance be reported?
If 'yes', my answer is as follows [many audit firms publish clarifications/ guidance on such matters and the following is my understanding from such a booklet]
The balance in a foreign bank account is a Monetary asset as the amount is fixed in terms of units of currency....
Foreign currency denominated monetary asset should be measured at the end of each reporting period using the exchange rate at that date. The offsetting entry should generally be recorded in the income statement as a foreign currency transaction gain or loss as discussed in ASC 830-10-45-17.
Hope this helps.
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ilysaml
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| Posted: 18 May 2016 at 05:43 | IP Logged
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Yes, exactly, thanks for the clarification and guidance.
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ilysaml
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| Posted: 18 May 2016 at 05:46 | IP Logged
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But what if it was a non-monetary asset like investment?
would the change in prices affect the value of the
investment, how would it be reported and accounted for?
For example, a US entity had an AFS investment with the
amount of 10 000 Euros purchased when the rate was 1.2,
after 8 months of acquisition, the rate is 1.8, so in
practical, the value of the investment decreased but
would that decrease be reflected as a change to the cost
or the FV of the investment?
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nambivar
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| Posted: 10 Jun 2016 at 16:31 | IP Logged
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ilysaml : ASC320 deals with the measurement of foreign currency denominated investment securities; per this, AFS securities [debt or equity] are non-monetary; the accounting treatment is: measure these AFS at fair
value and record changes in fair value in other comprehensive income; if there are changes in exchange rates, then, recognize such changes [in fair value attributable to changes in the exchange rate between the foreign currency and the functional currency] with other changes in fair value in other comprehensive income. Hope this helps.==
sorry for belated response.
====
Passed all 4 papers in 2011 [when I was 62].
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Topic: Foreign Currency
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