Foreign Exchange Loss Accounting
foreign exchange loss accounting
Unrealized foreign exchange gain/loss?
ADSENSE
My Canadian company does all business in US$ (sales, purchases). I revalue my accounts at the end of the year using the exchange rate on 31st December to CAD. I would like to know that when we revaluate our foreign currency accounts ( Receivables, Payables, US$ account, US$ Line of Credit) at year end we get a Foreign exchange Gain/Loss which is called the UNREALIZED FOREIGN EXCHANGE GAIN/LOSS in Canadian Dollars
Is the above to be brought into Income Statement and clubbed with the realized exchange gain/loss. What is the tax treatment for the unrealized portion of foreign exchange gain/loss?
Thanks for your help.
Your business is not trading currency.
The proper way to do this for CRA is to convert each transaction as it occurs to Canadian currency at the noon rate given by the Bank of Canada. There is no “exchange gain or loss”. There is simply income and expense in Canadian Dollars.
To put it another way, you need to account in Canadian Dollars, not foreign currency.
http://www.cra-arc.gc.ca/E/pub/gm/g300-7-10/g300-7-10-e.html
If you are a CORPORATION, you _can_ elect to report in a foreign currency under paragraph 261(3)(b) if you do so at least six months before the end of the tax year:
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/crprtns/fnctcrncy/menu-eng.html
Fairvalue #502 Fair Value Accounting Standards
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