Question

Discuss the issues involved when recording and transalating foreign curency transactions.

Answer 1

Discuss the Issues Involved when recording and translating foreign currency transactions?

Answer: Some of the issues which will be faced during the recording and translating foreign currency transactions are:

1. Currency Rate: Which rate should be taken for conversion either the opening rate or closing rate or average rate and the rate at which date the rate should be taken.

2. Monetary or Non - Monetary Asset or Liability : Recognizing whether that the particular item is an monetary or non monetary liability based on which the exchange rate will be selected.

3. Foreign Exchange Gain or Loss: As the currency rates are highly volatile there may be difference between rates as at the time of incurring expense and settlement of expense. This should be considered when recording foreign transactions.

4. Bank Charges: There will be bank charges on the conversion of foreign currency, these should be taken into consideration when recording the transaction for recording correct amount.

The above list is an illustrative and includes some other issues also.