Example: Realized Gain/Loss on Foreign Voucher and Alternate Currency Payment

In this example, a Canadian company enters a voucher in U.S. dollars (foreign currency) and pays the voucher in the euro (alternate currency).

Because of the exchange rate risk, the potential exists for two gains or losses - one between Canadian dollar (CAD) and U.S. dollar (USD) and the other between EUR, USD, and CAD.

Description	Currency	Amount	Exchange Rate January 1	Exchange Rate February 1
Voucher (domestic)	CAD	794.30
Voucher (foreign)	USD	500.00	1 USD = 1.58860 CAD
Payment (alternate)	EUR	575.07		1 USD = 1.58798 CAD 1 EUR = 1.38176 CAD 1 EUR = 0.86980 USD
Standard gain/loss	CAD	+ 0.31
Alternate currency gain/loss	CAD	+ 0.30

The foreign currency voucher on January 1 is 500.00 USD, which is 794.30 CAD in the domestic currency.

500.00 USD Ã 1.58860 = 794.30 CAD

The alternate currency payment on February 1 is 575.07 EUR

The foreign currency amount applied to the voucher is 500.20 USD.

575.07 EUR Ã 0.86980 = 500.20 USD

The domestic currency amount applied to the voucher is 793.99 CAD.

500.00 USD Ã 1.58798 = 793.99 CAD

The domestic currency amount of the payment is 728.20 CAD.

575.07 EUR Ã 1.38176 = 794.61 CAD