2016-12-28 00:00:00Finance and AccountingEnglishLearn the necessary steps for accurately reporting the financial effects of foreign currency transactions on your financial statements.https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/03/small-business-owner-reviews-financial-statement.jpghttps://quickbooks.intuit.com/ca/resources/finance-accounting/accounting-for-foreign-currency-transactions-on-financial-statements/Accounting for Foreign Currency Transactions on Financial Statements

Accounting for Foreign Currency Transactions on Financial Statements

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Foreign currency translation is the process of accurately accounting for foreign currency transactions on financial statements. This is the process of converting foreign currency transactions into the company’s reporting currency. There are three steps that apply to entities of all sizes:

  1. Determine the functional currency of the business. (This is the currency that most of the business’s transactions use.)
  2. Translate all foreign currency items into the functional currency.
  3. Record the gains and losses of the translation between currencies.

There are varying rules involved when translating the following items: assets and liabilities, income statement items, allocations, different balance sheet dates, profit eliminations, and cash flow statement items.

Considering the complexity, it may be best to consult with an accounting professional.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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