Example: 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 Ã 0.71761 = 717.61 EUR

The foreign currency payment on February 1 is 1,000.00 CAD