Monetary assets and liabilities
Monetary assets and liabilities is a financial accounting term that refers to all assets and liabilities whose value is measured and stated in cash, and that are likely to generate exchange-rate risk, as they represent amounts that counterparties settle in currencies different than the company’s functional one.
Among these assets and liabilities, we can include cash, accounts receivable, accounts payable, notes payable and long-term debt.
According to accounting standards, the company holding these assets and liabilities should measure their value in their functional currency at the end of each reporting period using the current exchange rate.
In this case, foreign currency fluctuations are likely to produce variations in these measurements which are reported as FX gains and losses in the period net income.