Chapter 12: Foreign Currency Translation

A discount or premium on a forward contract is deferred and included in the measurement of the related foreign currency transaction if the contract is classified as a - hedge of an identifiable foreign currency commitment. A transaction gain is recorded when there is an - exporting transaction and the exchange rate increases A transaction gain or loss at the settlement date is: - the difference between the recorded dollar amount of an account receivable denominated in a foreign currency and the amount of dollars received. A transaction gain or loss is reported currently in the determination of income if the purpose of the forward contract is to: - speculate in foreign currency A transaction gain or loss on a forward contract entered into as a hedge of an identifiable foreign currency commitment may be: - deferred and included in the measurement of the related foreign currency transaction. A transaction loss would result from: - a decrease in the exchange rate applicable to an asset denominated in a foreign currency. An indirect exchange rate quotation is one in which the exchange rate is quoted: - in terms of how many units of the foreign currency can be converted into one unit of domestic currency. During 2017, a U.S. company purchased inventory from a foreign supplier. The transaction was denominated in the local currency of the seller. The direct exchange rate increased from the date of the transaction to the balance sheet date. The exchange rate decreased from the balance sheet date to the settlement date in 2018. For the years 2017 and 2018, transaction gains or losses should be recognized as: - 2017, loss; 2018, gain