Realized Gain/Loss on Foreign Currency Voucher
and Payment
In this example, a French company enters a voucher in
Canadian dollars (foreign currency) and pays it in CAD (foreign currency).
Because of the exchange rate risk, the potential exists
for one gain or loss based on the fluctuation of exchange rates between the
domestic currency and the foreign currency at the time of payment.
|
Description
|
Currency
|
Amount
|
Exchange Rate
January 1
|
Exchange Rate
February 1
|
|
Voucher (domestic)
|
EUR
|
717.61
|
|
|
|
Voucher (foreign)
|
CAD
|
1,000.00
|
1 CAD = 0.71761 EUR
|
|
|
Payment (foreign)
|
CAD
|
1,000.00
|
|
1 CAD = 0.71767 EUR
|
|
Standard gain/loss
|
EUR
|
–0.06
|
|
|
The foreign currency voucher on January 1 is 1,000.00 CAD,
which is 717.61 EUR in the domestic currency.
1,000.00 CAD × 0.71761 = 717.61 EUR
The foreign currency payment on February 1 is 1,000.00 CAD
Standard Gain/Loss
The standard gain/loss is –0.06 EUR. This amount is based
on the exchange rate fluctuations from the voucher date to the payment date.
1,000.00 CAD × 0.71761 (exchange rate on voucher date) =
717.61 EUR
1,000.00 CAD × 0.71767 (exchange rate on payment date) =
717.67 EUR
717.61 − 717.67 = – 0.06 EUR
Realized Gain/Loss on Foreign Voucher and
Alternate Currency Payment
In this example, a Canadian company enters a voucher in
U.S. dollars (foreign currency) and pays the voucher in the euro (alternate
currency).
Because of the exchange rate risk, the potential exists
for two gains or losses - one between Canadian dollar (CAD) and U.S. dollar
(USD) and the other between EUR, USD, and CAD.
|
Description
|
Currency
|
Amount
|
Exchange Rate
January 1
|
Exchange Rate
February 1
|
|
Voucher (domestic)
|
CAD
|
794.30
|
|
|
|
|
|
|
|
|
|
Voucher (foreign)
|
USD
|
500.00
|
1 USD = 1.58860 CAD
|
|
|
Payment (alternate)
|
EUR
|
575.07
|
|
1 USD = 1.58798 CAD
1 EUR = 1.38176 CAD
1 EUR = 0.86980 USD
|
|
Standard gain/loss
|
CAD
|
+ 0.31
|
|
|
|
Alternate currency
gain/loss
|
CAD
|
+ 0.30
|
|
|
The foreign currency voucher on January 1 is 500.00 USD,
which is 794.30 CAD in the domestic currency.
500.00 USD × 1.58860 = 794.30 CAD
The alternate currency payment on February 1 is 575.07 EUR
The foreign currency amount applied to the voucher is
500.20 USD.
575.07 EUR × 0.86980 = 500.20 USD
The domestic currency amount applied to the voucher is
793.99 CAD.
500.00 USD × 1.58798 = 793.99 CAD
The domestic currency amount of the payment is 728.20 CAD.
575.07 EUR × 1.38176 = 794.61 CAD
Standard Gain/Loss
The standard gain/loss is + 0.31 CAD. This amount is based
on the exchange rate fluctuations from the voucher date to the payment date:
500.00 USD × 1.58860 (exchange rate on voucher date) =
794.30 CAD
500.00 USD × 1.58798 (exchange rate on payment date) =
793.99 CAD
794.30 − 793.99 = + 0.31 CAD
Alternate Currency Gain/Loss
The alternate currency gain/loss is + 0.30 CAD. This
amount is calculated using exchange rates on the payment date. It is based on
the difference between converting the alternate currency directly to the
domestic currency and converting the alternate currency to the foreign currency
to the domestic currency.
575.07 EUR × 1.38176 = 794.61 CAD
(575.07 EUR × 0.86980 = 500.20 USD) × 1.58798 = 794.31
CAD
794.61 − 794.31 = + 0.30 CAD
