cpac aurora dating - Consolidating balance sheet foreign currency
This section explains what users need to know to understand and analyze accounting information provided in the financial statements.
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However, if there’s some big change in foreign exchanges, you should really stick with the machine’s delivery date.
The following example will show you how to account for a prepayment for the acquisition of a machine if it’s classified as non-monetary asset.
Your functional currency is EUR and you entered into a contract for the production of a machine with a US supplier.
Your entry would be: Your company (functional currency: EUR) wants to rent a property in Chicago for 12 months and pays a security deposit of USD 10 000.
The deposit will be refunded at the end of rental term.
We are all aware of basic rules with regard to selection of appropriate exchange rate to apply.
If you would like to refresh a bit, you can sneak in my lesson from the IFRS In 1 Day dedicated to foreign currencies here.Therefore, you do not recalculate anything and your entry is: Now you may argue – but, the date when a machine appears in your financial statements is on delivery, so we should recalculate the full amount of USD 100 000 with the rate applicable on delivery.Some companies apply this treatment, but it’s not really correct and presenting true and fair view of the transaction.Transactions in foreign currencies are sometimes a nightmare.Obviously, we are trading with each other, our own currencies are different and foreign exchange rates are jumping up and down constantly.In most cases, prepayments made for the acquisition of fixed assets or any goods / services in general are rarely refundable, or the probability is very low.