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Forex
Forex
Forex
COLLEGE OF ACCOUNTANCY
2ND SEMESTER A.Y. 2023-2024
Foreign Translations – process of expressing monetary amounts that are stated in terms in a
foreign currency into the currency of the reporting entity by using an appropriate exchange rate.
Exchange rate – measure of how much of one currency may be exchanged for another currency.
Direct quote – measures how much of the domestic currency must be exchanged to receive one
unit of a foreign currency (i.e P53:$1).
Indirect quote – measures how many units of foreign currency will be received for one unit of
domestic currency (i.e $0.019:P1).
Spot rate – rate for the immediate delivery of currencies exchanged. It is the rate in which
currencies can be exchanged today.
Forward rate – rate at which currencies can be exchanged at some future date.
Forward exchange contract – contract to exchange at specified rate (forward rate) currencies of
different countries on a specified future date.
Monetary items – units of currency held and assets and liabilities to be received or paid in fixed
or determinable number of units of currency (i.e. cash, accounts and notes receivable/payable)
Nonmonetary items – referred to as accounts, the peso amounts of which they are presented in
the financial statements differ from what they are actually realized or represents (i.e. inventories,
prepaid expenses, PPE, capital stocks).
Local Currency Unit – currency of the country where the subsidiary operates.
Temporal method – applicable when the financial statements of the entity are prepared in a
currency other than its functional currency. Applicable to:
Stand-alone entity that records its books in a currency other than its functional
currency but presents its financial statements in its functional currency.; or
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UNIVERSITY OF LA SALETTE, INC.
COLLEGE OF ACCOUNTANCY
2ND SEMESTER A.Y. 2023-2024
Hyperinflation – situation where the prices of goods and services rise uncontrollably over a
defined period of time.
Translation Gain/Loss – arises when the exchange rates used in translating the present year’s
financial statements are diverse from those used in translating the previous year’s financial statements.
General Price Index - a measure of how prices change over a period of time.
Assume:
Philippines -
parent company;
US -
Subsidiary
Current
rate Temporal Restatement of F/S,
method method then consolidate
XG/XL -
Net
XG/XL - OCI Income
Currency
of a 3rd
country I.e
Yen
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