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,单击此处编辑母版标题样式,单击此处编辑母版文本样式,第二级,第三级,第四级,第五级,*,2001 Prentice Hall Business Publishing Financial Accounting,4/e Harrison and Horngren,10B-,*,Foreign Currency Exchange,International Business School,ACCOUNTING FOR INTERNATIONAL OPERATONS,The exhibit below shows the percentages of international sales for three large U.S.companies:,CompanyPercent of International Sales,Coca-Cola 62%,IBM 57,Intel 56,Accounting for business activities across national boundaries makes up the field of,international accounting,ACCOUNTING FOR INTERNATIONAL OPERATONS,The measure of one currency against another is called,the foreign-currency exchange rate,Using an exchange rate to convert the cost of an item given in one currency to its cost in a second currency is called a,translation,FOREIGN CURRENCIES AND EXCHANGE RATES,Foreign-Currency Exchange Rates at One Point in Time,Canada,European Common Market,France,Germany,Great Britain,Italy,Japan,Mexico,Dollar,Euro,Franc,Mark,Pound,Lira,Yen,Peso,$0.66,1.06,0.16,0.54,1.59,0.0005,0.0086,0.107,Country,Monetary,Unit,Dollar,Value,If an item costs 200 French francs,its translation to dollars is found by multiplying the amount in francs by the conversion rate:200 French francs x$0.16=32,FOREIGN CURRENCIES AND EXCHANGE RATES,Two main factors determine the supply and demand for a particular currency,The ratio of a countrys imports to its exports,When exports exceed imports,customers must buy the unit of currency in the international currency market to pay for their purchases,FOREIGN CURRENCIES AND EXCHANGE RATES,This demand drives up the price(the foreign exchange rate)of a currency,Conversely,as the supply of a currency increases,its price decreases,The,rate of return,available in the countrys capital market,The rate of return available in a countrys capital markets affects the amount of investment funds flowing into the country,FOREIGN CURRENCIES AND EXCHANGE RATES,When rates of return are high,international investors buy stocks,bonds,and real estate in that country,This activity increases the demand for the nations currency and drives up its exchange rate,The exchange rate of a,strong currency,is rising relative to other nations currencies,The exchange rate of a,weak currency,is falling relative to other currencies,FOREIGN CURRENCIES AND EXCHANGE RATES,Shipp Belting sells goods to Artes de Mexico for a price of 1 million pesos on July 28.On that date,a peso was worth$0.107.On August 28,when the peso is worth only$0.104,Shipp receives 1 million pesos from Artes,but the dollar value of Shipps cash receipt is$3,000 less than expected.The following journal entries show how Shipp would account for these transactions:,July 28 Accounts Receivable-Artes,(1,000,000 pesos x$0.107)107,000,Sales Revenue 107,000,Sale on account,Aug.28 Cash(1,000,000 pesos x$0.104)104,000,Foreign Currency Transaction Loss 3,000,Accounts Receivable-Artes 107,000,Collection on account,Shipp exposed itself to foreign-currency exchange risk and experienced a$3,000,foreign-currency transaction loss,If the peso had increased in value,Shipp would have experienced a,foreign-currency transaction gain,FOREIGN CURRENCIES AND EXCHANGE RATES,Assume Shipp Belting buys inventory from Gesellschaft Ltd.,a Swiss company.The two companies decide on a price of 20,000 Swiss francs.On September 15,when Shipp receives the goods,the Swiss franc is quoted at$0.7999.When Shipp pays on September 29,the Swiss franc has decreased in value to$0.7810.Shipp would record the purchase and payment as follows:,Sept.15 Inventory(,20,000 Swiss francs x$0.7999,)15,998,Accounts Payable-Gesellschaft Ltd.15,998,Purchase on account,Sept.29 Accounts Payable-Gesellschaft Ltd.15,998,Cash(20,000 Swiss francs x$0.781)15,620,Foreign Currency Transaction Gain 378,Payment on account,If the Swiss franc had strengthened against the dollar,Shipp would have had a foreign-currency transaction loss,The company reports the net amount of foreign currency transaction gains and losses on the income statement as Other Revenues and Gains,or Other Expenses and Losses,FOREIGN CURRENCIES AND EXCHANGE RATES,Other,Shipp Belting would combine the$3,000 foreign-currency loss and the$378 gain and report the net loss of$2,640 on the income statement as follows:,Other Expenses and Losses:,Foreign-currency transaction loss,net$2,622,One way for companies to avoid foreign-currency transaction losses is to insist that international transactions be settled in one currency.,Another way for a company to protect itself is by,hedging,Protection from transaction losses by engaging in a counterbalancing transaction,FOREIGN CURRENCIES AND EXCHANGE RATES,Some companies buy,futures contracts,which are contracts for foreign currencies to be received in the future,Futures contracts can effectively create a payable to exactly offset a receivable,and vice versa,10B-,16,FOREIGN CURRENCIES AND EXCHANGE RATES,AASB 121:,At balance date,all,monetary items,must be translated using the,reporting-date spot rate,.The exchan
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