Consolidating balance sheet foreign currency

16-Jan-2020 12:08 by 4 Comments

Consolidating balance sheet foreign currency

Total cost of a machine is USD 100 000, and you agreed to pay in 2 parts: How and when should you account for these transactions? However, no asset can be recognized in line with IAS 16 Property, plant and equipment, as recognition criteria are not met.Similarly, it is necessary to assess whether you should recognize some financial liability or not.

If there’s a clause of refunding you the deposit – what is the probability of a refund?

Transactions in foreign currencies are sometimes a nightmare.

Obviously, we are trading with each other, our own currencies are different and foreign exchange rates are jumping up and down constantly.

In most cases, prepayments made for the acquisition of fixed assets or any goods / services in general are rarely refundable, or the probability is very low.

Therefore, your and as a result, you should NOT recalculate it using the closing rate at the year-end.

I know that many companies adopted similar practice – they simply book the first payment as debit PPE – machine and credit cash. At this point, recognition criteria under IAS16 are met and you can recognize the machine as your own property, plant and equipment. In this case, the date of transaction is 15 January 20X2, when a machine was delivered and the delivery gave rise to a financial liability.

However, the invoice for the remaining part of USD 70 000 arrived on 20 January 20X2. As a result, your entry should be: rather than at the date of delivery of a machine, especially when there’s just a small delay in the invoice issuance.

The relevant dates and exchange rates are as follows: What’s your own accounting practice related to deposits, prepayments or advances in foreign currencies? Please, let me know in a comment below the article and if you know someone who can use this information, please share – thank you!

Update 05 February 2015: There was a great discussion on Linked In in relation to this topic.

When it comes to more complicated transactions, then it’s hard to apply the rules.

Often, I receive one and the same question: “Dear Silvia, we entered a contract for production and delivery of a machine specific to our business and we paid the first down-payment in a foreign currency. And let me illustrate 2 different scenarios in the examples.

This section explains what users need to know to understand and analyze accounting information provided in the financial statements.