Foreign Currency Transactions
Recording Foreign Currency Transactions
A foreign currency transaction occurs when an entity enters into a transaction denominated in a currency other than its functional currency. The transaction is initially recorded using the spot exchange rate on the transaction date.
- Foreign currency purchases.
- Foreign currency sales.
- Foreign currency borrowings.
- Foreign currency receivables and payables.
Note
Initial recognition always uses the exchange rate in effect on the transaction date.
Summary
Every foreign currency transaction begins with conversion into the functional currency using the current spot rate.