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As discussed in ASC 830-20-45-1, reporting entities are required to disclose aggregate foreign currency transaction gains and losses included in determining net income for the period. The disclosure may be included either on the face of the income statement or 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 illustrates whether a reporting entity can present some transaction gains or losses in one line item and aggregate others.
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.

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