Example: Detailed Currency Restatement Gains/Losses on a Foreign Transaction

In this example, a Colombian company (COP) enters a foreign currency voucher and payment in Chilean pesos (CLP). The company uses detailed currency restatement and restates amounts in the U.S. dollar (USD). The ledgers and currencies are:

• AA = COP

• CA = CLP

• XA = USD

A gain/loss is calculated between the CA ledger (CLP) and AA ledger (COP) and then between the AA ledger and XA ledger (USD). No gain/loss is calculated directly between the CA and XA ledgers. Instead, the gain/loss amount is based on the net difference between the CA to AA ledger and the AA to XA ledger calculations.

The system calculates gain/loss amounts for the XA ledger based on this information:

Date	Description	CA Ledger (CLP)	Exchange Rate (multiplier)	AA Ledger (COP)	Exchange Rate (divisor)	XA Ledger (USD)
June 1 June 30	Voucher Payment	100,000 100,000	0.75 0.76	75,000 76,000	750 800	100.00 93.75

The gain/loss amount in the XA ledger is + 5.00. To derive this net amount, the system performs these steps, in sequential order:

• Calculates a gain/loss amount of –1.25 between the CA and AA ledgers.

  –1,000 COP/ 800 = –1.25

  The gain/loss amount is recorded in the AA ledger and is based on the difference between the voucher and payment amounts (–1,000) in the AA ledger. The difference is then converted using the COP to USD exchange rate (800) effective on the payment date.

• Calculates a gain/loss amount of + 6.25 between the AA and XA ledgers.

  100.00 − 93.75 = + 6.25

  The gain/loss amount is recorded in the XA ledger and is based on the difference between the voucher amount converted using the exchange rate on the voucher date (100.00) and the voucher amount converted using the exchange rate on the payment date (93.75).