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4.2 Foreign currency transactions
Publication date: 31 May 2022
us Foreign currency guide
Foreign currency transactions can be entered into by a reporting entity or its distinct and separable operations. For example, a subsidiary of a reporting entity with a functional currency of the US dollar may purchase inventory at a price denominated in euros, or a foreign entity with a Mexican peso functional currency may sell products in US dollars; each of these is a foreign currency transaction.
Some commonly occurring foreign currency transactions include:
- Revenue and accounts receivable arising from export sales
- Expenses and accounts payable arising from the purchases of imported goods and the payment of wages in a foreign currency
- Intercompany transactions (see FX 7 for information on intercompany foreign currency transactions)
- Investments in debt denominated in a foreign currency
- Foreign currency denominated loans from financial institutions
- Foreign bank accounts
- Taxes imposed by foreign tax jurisdictions
When identifying foreign currency transactions, only the functional currency of the party that entered into the transaction should be considered; the functional currencies of the counterparty to the transaction and the reporting entity are irrelevant.
PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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