Foreign Currency Transaction Gains and Losses

Foreign Currency Transaction Gains and Losses

	IFRS	U.S.GAAP
Foreign currency transaction (un)realized gains and losses	Net income(*)	Net income(*)

(*) as a component of

1. other operating income / expense or
2. nonoperating income / expense (e.g.) net financing cost

Foreign Currency Transaction Gains and Losses (B/S)

Foreign entity's	Curret rate method	Monetary / nonmonetary method	Temporal method
Common stock (Stockholder's equity)	H	H	H
Monetary assets (*3) Monetary liabilities (*4)	C (*1)	C	C
Nonmonetary assets (*5) Nonmonetary liabilities (*6)	C	H (*2)	Current value: C (*7)   or Historical cost: H (*8)
Presentation Currency	FC (*13)		FC
Functional Currency	FC ≠ Parent's PC(*9)		FC = Parent's PC (*15)
Revenue and Expenses	A (*10)		Exchange rates used to translate the related assets (*16)   or Average (*17)
Cumulative Translation Adjustment (*11)	Stochholders' equity		Net income (*18)
Net asset/liability balance sheet exposure	Net asset (*12)		Net asset   or Net liability
FC (*13) strengthen	Positive CTA(*14)↑ or Negative CTA ↓ due to positive TA
FC weakens	Negative CTA↑ or Positive CTA ↓ due to negative TA
One of IFRS/U.S.GAAP requirement?	Yes		Yes

(*1) C: Current exchange rate. The spot exchange rate on the balance sheet date.
(*2) H: Historical exchange rate. The exchange rate that existed when the assets and liabilities were acquired.
(*3) Cash and receivables that are received in a fixed number of current units.
(*4) Payables that are paid in a fixed number of current units.
(*5) Inventory, fixed assets, and intangibles.
(*6) Deferred revenue.
(*7) Nonmonetary assets and liabilities that are measured a their current value on the balance sheet date.
(*8) Nonmonetary assets and liabilities that are measured a their historical cost on the balance sheet date.
(*9) PC: Presentation Currency
(*10) A: Averate exchange rate
(*11) unrealized translation gain or loss; when a specific foreign entity is sold, the cumulative translation adjustment related to that entity is reported as a realized gain or loss in net income.
(*12) Total assets > Total liabilities → Net asset balance sheet exposure (except in the rare case of the foreign entity's negative stockholders' equity)
(*13) FC: Foreign Currency
(*14) CTA: Cumulative Translation Adjustment
(*15) FC → Parent's PC: remeasurement
(*16) Expenses related to nonmonetary assets (e.g. COGS for inventory, Depreciation for fixed assets, and Amortization for intangible assets)
(*17) Other than the ones above.
(*18) Remeasurement gains and losses