Foreign Currency Accounting: Remeasurement and Translation Explained
DOI:
https://doi.org/10.63282/3050-922X.IJERET-V6I4P111Keywords:
Foreign Currency Remeasurement, Realized and Unrealized Foreign Exchange Gains or Losses, Foreign Currency Translation, Other Comprehensive Income, International Financial Reporting Standards (IFRS), US GAAP (Generally Accepted Accounting Principles), SAP S/4HANAAbstract
Finance is one of the most diverse and complex areas in international trade. Each country has their own rules, regulations and statutory requirements for managing financial transactions in their territories whereas business partners from other geographies or foreign investors may not be well versed with local laws and regulations, hence accounting standards such as IFRS (International Financial Reporting Standards) and GAAP (Generally Accepted Accounting Principles) have been established over a period of time to bring uniformity in financial practices and reporting so that it will be easier for anyone to understand the financials of any organization following these standards. Foreign Currency Remeasurement and Translation are two terms that are used quite interchangeably due to lack of knowledge or clear understanding. Both Foreign Currency Remeasurement and Translation are quite different from each other and have their specific definitions and treatment to be followed as per accounting standards such as IFRS, GAAP etc. This article discusses Foreign Currency Remeasurement and translation, their uses and accounting standards established around these two concepts
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