Can you help me with foreign currency translation?

Does anybody know the problems associated with foreign currency translation in financial statements relating to realised and unrealised gains and losses? Thanks

Public Comments

1. I think this has to do with when you bill someone or send an invoice in a different currency than your own. For example if I bill someone for some work I do for $1000, then today, this is worth £490. But if the £-$ interest rate changes between now and when it is paid, then the $1000 might become £550 and there is an unrealised gain of £60
2. Check out International Accounting Standards Board. It might help. Very large multinational CPA firms also often have published brochures you can download comparing US GAAP with another country's GAAP and also with the IAS in treatment of G&Ls. There are different kinds of problems running from how they are calculated to where they are presented in the financial statements. Good luck. I wish I remembered more from my Intl Acctg class!
3. It depends on whether you're talking of monetary or non-monetary items. This topic is governed by IAS 21 The Effects of Changes in Foreign Exchange Rates. Foreign Currency Transactions A foreign currency transaction should be recorded initially at the rate of exchange at the date of the transaction (use of averages is permitted if they are a reasonable approximation of actual). [IAS 21.21-22] At each subsequent balance sheet date: [IAS 21.23] - Foreign currency monetary amounts should be reported using the closing rate. - Non-monetary items carried at historical cost should be reported using the exchange rate at the date of the transaction. - Non-monetary items carried at fair value should be reported at the rate that existed when the fair values were determined. Exchange differences arising when monetary items are settled or when monetary items are translated at rates different from those at which they were translated when initially recognised or in previous financial statements are reported in profit or loss in the period, with one exception. [IAS 21.28] The exception is that exchange differences arising on monetary items that form part of the reporting entity's net investment in a foreign operation are recognised, in the consolidated financial statements that include the foreign operation, in a separate component of equity; they will be recognised in profit or loss on disposal of the net investment. [IAS 21.32]