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ACCOUNTING POLICIES FOR EXCHANGE GAINS AND LOSSES ON LONG‐TERM MONETARY ITEMS
Author(s) -
Eddey Peter H.
Publication year - 1985
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.1985.tb00138.x
Subject(s) - currency , business , liability , accounting , monetary economics , financial statement , asset (computer security) , foreign exchange , term (time) , economics , computer security , quantum mechanics , physics , audit , computer science
Accounting standards and exposure drafts on foreign currency translation have differed in their recommended treatment of unrealised exchange gains and losses on long‐term monetary assets and liabilities of domestic firms denominated in foreign currencies. This paper compares the immediate recognition method (U.S. and U.K.) to the defer and amortise method (Australia and Canada) with respect to their effects on net income, asset and liability measurement. Reasons why management will be concerned with the financial statement effect of exchange rate changes are advanced and these, together with the empirical analysis of the competing accounting methods, help explain the evident support the Australian corporate sector has shown for the defer and amortise method.