• To record foreign currency tranctions.
• The expanded scale of international investment increases the need to transfer accounting information from one country to users in others.
• *6.Foreign currency . • A currency other than the currency of the country being referred to; A currency other than the reporting currency of the enterprise being referred to. • 外币:特定国家的非本国货币;特定企业的非报告货 币. • *7.Foreign currency financial statement. Financial statement that employ foreign currency as the unit of measure. • 外币财务报表:以外币作为计量单位的财务报表.
• ２.Indirect exchange rate (quote) • (Receivable Quote 应收法） • It is the reciprocal(倒数）of the direct quote, the price of a unit of domestic currency in terms of the foreign currency. It would take approximately 0.1639 U.S dollar to acquire 1 Chinese yuan .
• 3.current rate:
• The exchange rate in effect at the
relevant financial statement date.
•
现行汇率:相关财务报表日的实际汇率.
• 4.discount. • When the forward exchange rate is below the current spot rate • 折价:远期汇率低于即期现行汇率的差异.
Glossary of foreign currency translation terms • 1.attribute. • The quantifiable characteristic of an item that is measured for accounting purposes. For example, historical cost and replacement cost are attributes of an assets. • 计量属性:某一项目在会计计量中的可计量特征.例如 ,历史成本和重置成本就是资产的计量属性. • *2.conversion. • The exchange of one currency for another. • 兑换:一种货币与另一种货币的交换.
• On the contrary, assume the quote was $0.1195= ￥1 yesterday
but is $0.1200= ￥1 , is the Chinese yuan appreciation or depreciation?
• Appreciation
• （间接标价法下价格增加意味着本国货币的升值）
• Example: Suppose that the cash balance of a Chinese subsidiary located in America, on June 30 is $1000,000.The direct exchange rate on that date is $1=￥6.10, the U.S dollar
• (￥1 = USD 0.1639 ）
Foreign Currency quote method
• Question:
• If the quote was USD1=￥6.10 yesterday, and it is
$1=￥6.20today? Is the Chinese yuan appreciation or depreciation? • Depreciation • （直接标价法下价格增加意味着本国货币的贬值）
• *8.Foreign currency translation. • Transactions (for example ,sales or purchases of goods or services or loans payable or receivable) whose terms are stated in a currency other than the entity’s functional currency. • 外币折算:用企业功能货币以外的货币表述的 交易.(例如,销售\购买货物\劳务或者应付\应 收款等.
BACKGROUND AND TERMINOLORY • Foreign Currency Market Price Method • Direct or Indirect quote. P169 • 1. Direct exchange rate method (Direct Quote)
• ( Payable Quote应付报价法)
•
Translation of foreign currency balance is straightforward
with either direct or indirect quotes. Domestic currency equivalents(等值） are obtained by multiplying foreign currency balances by direct exchange rate quotations or dividing foreign currency balances by indicurrency transaction accounting
•
REASONS FOR TRANSLATION p168
• Translation is the process of restating (重新表述）financial statement information from one currency to another. The reasons for translation includes: • A company with overseas operations should prepare consolidated
• Merchandise Inventory/ Purchases
• Accounts Payable
• Accounts Receivable
• Sales revenues
• Cash • Cost of Goods Sold • (Foreign) Exchange loss • (Foreign) Exchange gain • Exchange Gains or Losses • Deferred Exchange Gains
• *5.exposed net asset position. • The excess of assets that are measured or denominated in foreign currency and translated at the current rate over liabilities that are measured or denominated in foreign currency and translated at the current rate. • 受险净资产：用外币计量或标价并按照现行 汇率折算的资产，超过用外币计量或标价并 按照现行汇率折算的负债的差额．
equivalents of the Chinese yuan cash balance on June 30 is
￥6,100,000. • $1000,000x ￥6.10 = ￥6,100,000 (direct quote)
•
$1000,000÷ $0.1639= ￥6,100,000 (indirect quote)
4. Single-transaction Perspective VS. Twotransaction Perspective
5.The concept exchange gains and losses and its main contents. 6.Four foreign currency translation methods.
• Deferred Exchange Losses
• • • • • • • • • • • •
Attribute Current rate Foreign currency Functional currency Historical rate Monetary items Transaction gains and losses Translation gains and losses Current rate method Current-noncurrent method Monetary-nonmonetary method Temporal method
• In a direct quote, the exchange rate specifies the number of domestic currency units needed to acquire a unit of foreign
currency.
• For example, on a given day, the U.S dollar price of a Chinese yuan might be 6.10 in China. (USD1=￥6.10） • *The majority countries in the world use the direct quote except British and America .