My company does all business in US$. I revalue my accounts at the end of the year using the exchange rate on 31st December to CAD. I would like to know that when we revaluate our foreign currency accounts ( Receivables, Payables, US$ account, US$ Line of Credit) at year end we get a Foreign exchange Gain/Loss which is called the UNREALIZED FOREIGN EXCHANGE GAIN/LOSS in Canadian Dollars
Is the above to be brought into Income Statement(which means taxable) or it is to be shown in the Balance Sheet and carried forward.
Thanks for your help
Revaluation at year end
Moderator: Mark T Serbinski CA CPA
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- Posts: 14
- Joined: Tue Oct 13, 2009 7:00 pm
Very good question. Please note that this applies to income transactions (e.g. payables, receivables, inventory -- *NOT* capital assets, investments, etc.).
Tax requirements are as follows:
- Exchanges gains or losses may be accounted for on a realized *OR* accrual basis.
- Practice adopted must be consistent from year-to-year (e.g. you can't go accrual in one year, realized in the next).
- As an *administrative*policy (i.e. not by law) the tax office prefers you follow the same method for tax and accounting.
So, take your pick and follow the policy consistently from year-to-year.
Tax requirements are as follows:
- Exchanges gains or losses may be accounted for on a realized *OR* accrual basis.
- Practice adopted must be consistent from year-to-year (e.g. you can't go accrual in one year, realized in the next).
- As an *administrative*policy (i.e. not by law) the tax office prefers you follow the same method for tax and accounting.
So, take your pick and follow the policy consistently from year-to-year.
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- Posts: 14
- Joined: Tue Oct 13, 2009 7:00 pm