ADVANCED ACCT.,SEL.CH.-W/ACCESS>CUSTOM<
14th Edition
ISBN: 9781307566574
Author: Hoyle
Publisher: MCG
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Question
Chapter 9, Problem 1Q
To determine
Identify the concept explaining two-transaction perspective for foreign currency transactions.
Expert Solution & Answer
Answer to Problem 1Q
Accrual approach underlies the two-transaction perspective for foreign currency transactions.
Explanation of Solution
When a trade is entered by the two parties from two different counties, the currency in which the transactions are to be recorded or settled needs to be decided first. While there is any change in the foreign currency exchange rate, the gain or loss in net income needs to be recognized in the financial statements in the period in which such change in exchange rate occurs. This concept is called the accrual approach or the two-transaction perspective for foreign currency transactions.
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ADVANCED ACCT.,SEL.CH.-W/ACCESS>CUSTOM<
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