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foreign currency measurement

Foreign currency measurement is the accounting method used by an organisation to measure foreign transactions in their functional currency. International businesses that pay suppliers in foreign currencies and/or sell their products in overseas markets need to translate those costs and revenues into their functional currency in their financial statements. Since currencies fluctuate continuously, these companies […]

foreign currency monetary items

Foreign currency monetary items are FX-denominated assets and liabilities representing a claim to receive, or an obligation to pay, a fixed amount of foreign currency units. Examples of foreign currency monetary items are FX-denominated cash positions, accounts payable and receivable, and long-term debt. By contrast, non-monetary foreign currency items include inventory, fixed assets and long-term […]

foreign currency options

A foreign currency option is a financial derivative instrument that gives the buyer the right —but not the obligation — to buy (in a ‘call’ option), or to sell (in a ‘put’ option) the contracted currency at a set price or exchange rate (known as the ‘strike price’), on a predetermined expiration date. The seller […]

foreign currency remeasurement

Foreign currency remeasurement is a procedure that restates the value of payables, receivables, and cash balances posted in a foreign currency to the company currency at period end. The key day for foreign currency remeasurement is the last day of the period or fiscal year. Items are valued using the exchange rate valid on the […]

foreign currency revaluation

Foreign currency revaluation is a treasury concept defining the method by which international businesses translate the value of all their foreign currency-denominated open accounts – i.e. payable and receivable transactions – into the company’s reporting currency. The challenges of Foreign currency revaluation Accounting regulations require international businesses to keep an updated record of the value […]

foreign currency risk

Foreign currency risk or foreign exchange rate risk, also known as exchange rate risk, is the possibility that currency fluctuations can affect a firm’s expected future operating cash flows, i.e., its future revenues and costs. Exchange rate risk affects all companies with international operations. For companies desiring to take advantage of the growth opportunities from […]

foreign currency risk management

Foreign currency risk management is the process that allows firms to protect themselves from currency risk. This allows them to take control of their own competitiveness by capturing the growth opportunities resulting from buying and selling in multiple currencies. With FX risk under control, managers can focus on growing the business. Foreign currency risk management […]

foreign currency transaction

A foreing currency transaction is a sales or purchase transaction denominated in a currency other than the company’s functional currency. A foreign currency transaction involving foreign currencies commonly goes through several stages. (a) Forecast. A forecast is an anticipated transaction that is not yet legally committed. In IFRS terms, a transaction is ‘expected to occur’ […]

foreign currency translation

Foreign currency translation is the restatement, in the currency in which a company presents its financial statements, of all assets, liabilities, revenues, expenses, gains and losses that are denominated in foreign currencies. The process of foreign currency translation results in accounting FX gains and losses. There are three main foreign currency translation methods available. With […]

foreign currency valuation

Foreign currency valuation is a term used by vendors of Enterprise Currency Management vendors to record the impact of foreign currency changes into its FX-denominated assets, liabilities, revenues, expenses, gains and losses Once foreign currency valuation is complete, foreign currency translation is executed to prepare financial reports in the firm’s presentation currency.