RSM321H1 Chapter Notes - Chapter 10: Foreign Exchange Spot, Canadian Dollar, Spot Contract

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3 Dec 2017
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Many canadian companies conduct business in foreign countries as well as in canada. No specific accounting issues arise when the parties involved in an import or export transaction agree that the settlement will be in canadian dollars. Because it is a canadian-dollar- denominated transaction, the company will record the foreign purchase or sale in exactly the same manner as any domestic purchase or sale. In many situations, however, the agreement calls for the transaction to be settled in a foreign currency. This means one of two things: (a) the. Transactions such as these are called foreign-currency-denominated transactions. Both the recording of foreign-currency-denominated transactions and the translation of foreign- currency financial statements require the use of currency exchange rates. An exchange rate is simply the price of one currency in terms of another currency. Transactions denominated in foreign-currency are recorded in canadian dollars at the spot rate in effect on the date of the transaction.

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