Foreign Currency Accounting

transactions - are w/ a foreign entity to be settled/denominated in foreign currrency translation - foreign $ of a foreign entity expressed in domestic $ exchange rate - price of one unit expressed in another curency direct method -- domestic price of one unit of another currency ie 1GBP= $1.47USD indirect method - foreign price of one unit of domestic ie .68Euro = $1USD - Current exchange rate - = exchange at current date- Forward exchange rate - exchanging 2 currencies at specific future date- historical exchange - rate in effect at date of issuance/acquisition of assets- weighted average rate - calculated to take into acct fluctuations within a period- forward exchange contract - future specified date & rate at fixed amount of currencies of different countries- reporting currency - currency of reporting entity - functional currency - primary economic environment where entity operates- foreign currency translation - functional to reporting currency - foreign currency remeasurement - local to functional curremcy - Capital accounts are translated into the functional currency using the historical exchange rates.Rule: "Translation adjustments" are not included in determining net income for the period but are disclosed and accumulated as a component of other comprehensive income in consolidated equity until disposed of.However, gains or losses from remeasuring the foreign subsidiary's financial statements from the local currency to the functional currency should be included in "income from continuing operations" of the parent company.