Foreign exchange gain or loss configuration

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Functional currency refers to the main currency used by a business or unit of a business. It is the monetary unit of account of the principal economic environment in which an economic entity operates.

Generally Accepted Accounting Principles GAAP [2] provide rules for translation of foreign currency transactions and financial statements. SFAS 52 introduced the concept of functional currencydefined as "the currency of the primary economic environment in which the entity operates; normally, that is, the currency of the environment in which an entity primarily generates and expends cash.

Businesses may enter into transactions sales, payments, etc. Each qualified business unit QBU of the business translates these items to its functional currency at an appropriate exchange rate. It then prepares periodic reports of its position balance sheet and activity income and cash flow forex gain loss account sap dubai in that functional currency. When various QBUs are combined, these reports are translated and consolidated to become financial statements.

Translation of statements may result in translation differences, forex gain loss account sap dubai are accounted for as a cumulative translation adjustment. Transactions are often translated at the spot ratei. Jim is traveling on business and pays a hotel bill for SFR Jim's home currency is the GBP.

Jim records an expense of GBP Alternatively, businesses may record transactions in another currency using some sort of standard rate for some period, such as the average rate for the month. Businesses using the accrual method of accounting forex gain loss account sap dubai recognize revenue or expense in one period and receive or pay it in another.

In the intervening period the exchange rate may have changed. When an accrued item is settled, the difference due to exchange rate movement forex gain loss account sap dubai the amount accrued and the amount settled is treated as foreign exchange gain or loss. This gain or loss is recognized in the same manner as the underlying transactions, such as an ordinary travel expense.

From Wikipedia, the free encyclopedia. Retrieved from " https: Views Read Edit View history. This page was last edited on 22 Mayat By using this site, you agree to the Terms of Use and Privacy Policy.

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