Tham khảo tài liệu 'critical financial accounting problems issues and solutions_10', tài chính - ngân hàng, kế toán - kiểm toán phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | 166 Critical Financial Accounting Problems The entries for this foreign exchange transaction follow 1. At the date of the foreign exchange transaction November 20 19X3 Investment in Other National Company 640 000 Cash 640 000 2. At the balance sheet date no exchange gains and losses are recognized in the current net income but instead enter into the determination of the translation adjustment as a component of stockholders equity as determined by the following Amount used in translation adjustment FC800 000 - 40 000 Foreign Currency Transactions Involving Forward- Exchange Contracts A forward-exchange contract is defined as an agreement to exchange different currencies at a specified date and at a specified rate the forward rate . Firms enter into a forward-exchange contract with a third-party broker to guarantee a fixed exchange for the transaction. Three adjustments have to be computed and accounted for 1. Gain or loss whether or not deferred on a forward contract. It is equal to the foreign currency amount of the forward contract multiplied by the difference between the spot rate at the balance sheet date and the spot rate at the inception of the forward contract or the spot rate last used to measure a gain or loss on that contract for an earlier period . 2. Discount or premium on a forward contract. This discount is equal to the foreign currency amount of the contract multiplied by the difference between the contracted forward rate and the spot rate at the contract inception date. 3. Gain or loss on a speculative forward contract. This is equal to the foreign currency amount of the contract multiplied by the difference between the forward available for the remaining maturity of the contract and the contract forward rate or the forward rate last used to measure a gain or loss on that contract for an earlier period . The accounting treatment for a foreign currency transaction involving foreign exchange contracts can be handled in different ways .
