Foreign-currency transaction remeasurement

Foreign-currency transaction remeasurement converts a monetary receivable, payable, or other balance from its denomination currency into the entity's functional currency. The entity first records the transaction using the exchange rate on the transaction date. ASC 830-20-30-1 establishes that initial measurement. At each later balance-sheet date, the entity updates qualifying monetary balances using the current rate. ASC 830-20-35-1 addresses that subsequent measurement.

Suppose a U.S.-dollar-functional company sells goods for EUR 10,000 when one euro equals $1.08. It records a $10,800 receivable. If one euro equals $1.11 at year-end, the receivable becomes $11,100 and the company records a $300 transaction gain. If the customer pays when one euro equals $1.09, the receivable falls to $10,900 and the company records a $200 loss after year-end.

Keep the units visible: foreign-currency units multiplied by dollars per foreign-currency unit equals dollars. A reciprocal rate or reversed sign can produce a plausible but wrong answer. Also separate remeasurement from translation. Remeasurement starts with a transaction denominated in a currency other than the functional currency and generally sends its gain or loss to earnings. Translation applies to a foreign operation's completed statements and generally sends the balancing adjustment to OCI.