Page 80 - Microsoft Word - 00 P1 IW Prelims.docx

Chapter 6

Recording overseas transactions

2.1 Initial transactions and settlements

Overseas transactions must be translated into the entity’s functional currency before
they are recorded.

Initial transaction Cash settlement

Translate using Translate using
spot (historic) spot (historic)
exchange rate exchange rate

If exchange rates have moved between the initial transaction and the
settlement date then a foreign exchange gain or loss will arise. This is
recorded in the statement of profit or loss.

Illustrations and further practice

Now try TYU question 2 (a) from Chapter 6

74