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ASC 830-20-20 defines transaction gains and losses.

Definition from ASC 830-20-20

Transaction Gain or Loss: Transaction gains or losses result from a change in exchange rates between the functional currency and the currency in which a foreign currency transaction is denominated. They represent an increase or decrease in both of the following:
  1. The actual functional currency cash flows realized upon settlement of foreign currency transactions
  2. The expected functional currency cash flows on unsettled foreign currency transactions.

21.3.1 Presentation and disclosure of transaction gains and losses

As discussed in ASC 830-20-45-1, reporting entities are required to present aggregate foreign currency transaction gains and losses included in determining net income for the period on the face of the financial statements or disclose them in the footnotes.
Although ASC 830 does not specify where foreign currency transaction gains and losses should be presented in the income statement, we believe there are two acceptable approaches. Reporting entities should apply the selected approach consistently for all periods presented.
Reporting entities often elect to aggregate all transaction gains and losses and classify the net amount in a single caption in the income statement. We believe that under this approach, classification of the transaction gains and losses in operating income is reasonable given the general nature of the accounts that generate these gains and losses.
Alternatively, reporting entities may elect to report transaction gains and losses in the line items to which they relate. For example, transaction gains and losses related to balances associated with cost of sales could be recorded in the cost of sales line item. It may be inappropriate to classify foreign exchange gains and losses related to cost of sales as part of cost of sales if foreign currency transaction amounts related to revenue are not similarly classified as part of revenue. When using this approach, reporting entities are still required to disclose the aggregate amount of transaction gains and losses.
A reporting entity should consistently apply and disclose its accounting policy election related to the presentation of foreign currency transaction gains and losses.
Question FSP 21-1
Can a reporting entity report certain transaction gains or losses in one line item while reporting all others on an aggregate basis?
PwC response
Generally no. However, in certain situations, the inclusion of the foreign currency transaction gains or losses on a reporting entity’s income statement in a single line along with all other transaction gains and losses may not appropriately reflect the reporting entity’s financial performance. One example is a foreign subsidiary that has the same functional currency as the parent (e.g., an extension of the parent or a subsidiary that is operating in a country experiencing high inflation) that has issued variable rate debt in the local currency. In these cases, the foreign subsidiary may choose to reflect the gains or losses on this remeasurement in a line item that they believe more accurately reflects the economic substance, such as interest expense. Generally, we would not object to this presentation.

21.3.1.1 Presentation of transaction gain/ loss on deferred taxes

Deferred tax assets and liabilities are considered monetary items and should be remeasured each reporting period at current exchange rates with the related gains and losses included in income. ASC 830-740-45-1 indicates that the transaction gain or loss on deferred tax assets and liabilities may be presented either (1) with other transaction gains and losses or (2) as a component of the deferred tax benefit or expense on the income statement if that presentation is more useful to financial statement users.
If the reporting entity chooses to present transaction gains and losses in the income tax line item on the income statement, it should still include such amounts in the disclosure of the aggregate transaction gain or loss for the period required by ASC 830-20-45-1.

21.3.1.2 Presentation option for dealer transactions

ASC 830-20-45-2 provides banks and other dealers in foreign currency an option to present gains and losses arising from foreign currency transactions as dealer gains or losses rather than as transaction gains or losses.
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