It's quite common for a business to buy from companies located in other countries, or to sell goods and services to them. If so, the organization will likely have to deal with the accounting for foreign currencies. This course describes all accounting activities related to foreign currencies, with complete coverage of the steps needed to convert foreign currency financial statements into the reporting currency of the parent entity, as well as the accounting for basic foreign exchange transactions and hedging activities. In addition, the course addresses related topics, such as the additional steps required to close the books and internal auditing tasks related to foreign currencies.
You'll find answers to many questions about foreign currency accounting in this course, including:
- What is the process for translating financial statements?
- Which exchange rates should I use as part of the translation process?
- What should I do if a subsidiary is located in a country that has a hyperinflationary economy?
- What is the nature of foreign exchange risk?
- What hedging instruments are available to mitigate foreign exchange risk?
- How do I account for a foreign exchange hedge?
Upon successful completion of this course, participants will be able to:
- Identify the criteria for determining a functional currency.
- Identify the issue that shifts a gain or loss out of other comprehensive income.
- Identify the steps used to deal with the financial statements of an organization operating in a hyperinflationary economy.
- Recognize the basic accounting for foreign currency transactions.
- Recognize what constitutes an effective hedge.
- Recognize the various types of hedging tools.
- Recognize the types of disclosures related to foreign exchange.
- Recognize the activities related to foreign exchange that internal auditors might engage in.
Table of Contents
Chapter 1 – Financial Statement Translation
A Note Regarding Consolidations and the Equity Method
Financial Statement Translation
Determination of Functional Currency
Translation into Functional Currency
Translation of Financial Statements
Reporting in Other Comprehensive Income
Impact on the Statement of Cash Flows
Special Translation Situations
Use of Average Exchange Rates
No Applicable Period-End Exchange Rate
Derecognition of a Foreign Entity Investment
Impact of Financial Statement Translation on Closing the Books
Chapter 1 – Review Questions
Chapter 2 – Foreign Currency Transactions
Basic Foreign Currency Transactions
Foreign Exchange Risk
The Hedging Concept
Foreign Exchange Hedging Instruments
Loan Denominated in a Foreign Currency
The Forward Contract
The Futures Contract
The Currency Option
The Cylinder Option
Hedge Accounting - General
Hedge Accounting – Cash Flow Hedges
Hedge Accounting – Net Investment Hedges
Unhedged Foreign Exchange Gains and Losses
Inclusion in Impairment Analysis
Chapter 2 – Review Questions
Chapter 3 – Other Foreign Currency Topics
Internal Audit Tasks
Foreign Currency Disclosures
Chapter 3 – Review Questions
Review Question Answers and Rationales
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