Changes in the value of foreign currency / foreign exchange rates generally in the form:
1. Appreciation or depreciation
Increase or decrease the value of a country's currency against foreign currencies are entirely dependent on market forces (supply and demand of foreign exchange), both domestic and abroad.
2. The devaluation or revaluation
Increase or decrease the value of a country's currency against foreign currencies are influenced by government policies.
The fall in the value of a country's currency against foreign currencies that occur daily (depreciation) actually has an idea as devaluation, but because of the changes are very small, it is not perceived as a devaluation.
Which is considered as a devaluation is a decrease in the value of a country's currency against foreign currencies are expressed formally by the government, suddenly done, and there are large differences in the exchange rate differences between before and after the devaluation. This applies also to the appreciation and revaluation.
Basic Use of Foreign Currency Translation of Foreign Exchange Transactions In
Definition of foreign exchange by the Financial Accounting Standards (1999: 10.1) is: "The difference resulting from reporting the number of units of the same foreign currency in the reporting currency at different exchange rates."
Thus, foreign exchange differences arising from foreign exchange transactions (foreign exchange contracts) should be reported in the value of currency.
Recognition of foreign exchange by the Financial Accounting Standards determined as follows:
"... If there is a change in the exchange rate between the transaction date and the date of settlement (settlement date) monetary postal arising from transactions in foreign currencies. When the onset and completion of a transaction to be in the same accounting period, the exchange difference is recognized in that period. However, if the onset and completion of a transaction is within the accounting period, the exchange differences should be recognized for each accounting period to account for changes in the exchange rate for each period. "(Financial Accounting Standards 1999: 10.3)
From the above it can be concluded that the settlement in a foreign currency transactions should be done in the accounting period in question and also must take into account the existence of foreign exchange differences arising from the transaction.
Foreign currency transactions are recorded based on the exchange rate at the transaction date and the balance sheet date, assets and liabilities denominated in foreign currencies are translated at the exchange rate should be on the balance sheet date, and arising accommodated in the profit and loss calculation period of the business concerned. While foreign exchange differences that occur at the time the transaction as a result of devaluation or revaluation can be charged or credited directly in the current period or deferred and amortized over the period.
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