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U.S. GAAP Codification of Accounting Standards

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U.S. GAAP Accounting Standards
Codification Topic 830-20: Foreign Currency Transactions

Codification Topic 830-20
Foreign Currency Transactions

Foreign Currency Transactions

SFAS 52, December 1981
"Foreign Currency Translation"

Foreign currency transactions
Foreign currency transaction
--> transactions denominated in the currency other than functional currency

Recognition of foreign currency transactions
Foreign currency transactions are recorded
--> in functional currency
--> using the exchange rate at the transaction date

Foreign currency transaction gains and losses
1. Gains and losses due to the changes in exchange rates between (A) and (B)
(A) transaction date
(B) settlement date

An example
1. US dollar is functional currency
Transaction is denominated in Euro

2. November 1, 20x1 when €1 = $ 1.40
Sold 200 units of products at €10 per unit.

Accounts receivable             $2,800
      Sales                                           $2,800

3. December 15, 20x1 when €1 = $ 1.45
Collected €2000

Cash                                  $2,900
      Accounts receivable                        $2,800
      Foreign currency transaction gain         $100

Foreign currency transaction gains and losses are
--> recognized in income
--> except for the cases listed in (C), (D) and (E)

(C) foreign currency transactions
--> designated as hedges of a net investment in foreign operations
--> gains and losses are reported in other comprehensive income (OCI)

(D) intra-entity foreign currency transactions
--> with long-term investment nature
--> such transactions are considered as part of the net investment

(E) changes in fair value of available for sale debt securities
--> in foreign currency are
--> reported in other comprehensive income (OCI)

Codification Topic 830
Foreign Currency Matters

Subtopics of Codification Topic 830

   830-10 Overall
   830-20 Foreign currency transactions
   830-30 Translation of financial statements

Accounting Terms of Codification Topic 830-10

   Attribute
   Exchange rate
   Foreign currency
   Foreign currency statements
   Foreign currency transactions
   Foreign currency translation
   Foreign entity
   Functional currency
   Local currency
   Reporting currency
   Reporting entity
   Special drawing rights
   Translation
   Translation adjustments
   Unit of measure

Accounting Terms of Codification Topic 830-20

Transaction date
Transaction gain or loss

Accounting Terms of Codification Topic 830-30

Conversion
Noncontrolling interest