First, the concept of personal transaction.
According to the transaction point of view, the purchase and sale transactions settled in non-functional currency must be completed on the settlement date, and the functional currency equivalent of sales revenue or purchase cost should depend on the exchange rate on the settlement date. From buying and selling business to settlement is only two stages of a transaction. In this way, not only monetary items such as foreign exchange receivable and payable have to bear the risk of exchange rate changes before settlement, but also non-monetary items such as sales revenue and purchase cost have to bear the risk of exchange rate changes before settlement, that is, they have to be re-converted into local currency equivalents according to the current exchange rate, and the difference directly adjusts the local currency equivalents of non-monetary items such as sales revenue and purchase cost.
Second, two kinds of trading views
These two transaction views treat purchasing, sales and settlement as two independent transactions. The functional currency equivalent of sales revenue and purchase cost settled in non-functional currency should depend on the exchange rate at the time of purchase and sale. If the exchange rate changes on the settlement date, "exchange gains and losses" will be formed. According to the two transaction views, foreign currency accounts payable or accounts receivable formed in purchase or sales transactions will bear the risk of exchange rate changes, while the purchase costs such as inventory and fixed assets will not bear the risk of exchange rate changes. Once confirmed and recorded at the original cost, they will not be adjusted; The functional currency conversion of sales revenue depends on the exchange rate on the establishment date of sales, and it will not be adjusted once confirmed. In this way, if the exchange rate changes on the account settlement date, its impact should be recognized as the financial risk caused by the exchange rate change and reflected in the "exchange gain and loss" account. If the settlement date is in the next accounting period, the functional currency equivalent of foreign currency accounts payable or accounts receivable should be adjusted at the end of the period, and the adjusted amount should be recognized as summary profit and loss, and the influence of exchange rate changes between the end of the previous period and the settlement date should be confirmed on the settlement date.
Some preventive measures:
Foreign currency invested capital: converted at the spot exchange rate on the trading day, and there is no conversion difference with the functional currency of the corresponding currency item.
In essence, it constitutes a foreign currency monetary project for overseas business investment. Exchange differences arising from exchange rate changes are included in the translation differences of foreign currency statements, and are included in the current profits and losses when disposing of overseas operations.
Exchange rate selection: upon initial confirmation, the foreign currency transaction amount is converted into the bookkeeping base currency amount according to the spot exchange rate between the bookkeeping base currency and the foreign currency on the transaction date. If the exchange rate changes little, it can also be converted by the approximate value of the spot exchange rate. Spot exchange rate is mainly used.