Revaluation at year end

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mikkyd
Posts: 7
Joined: Mon Mar 30, 2009 11:07 am

Revaluation at year end

Post by mikkyd »

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
baby_king_bob
Posts: 14
Joined: Tue Oct 13, 2009 7:00 pm

Post by baby_king_bob »

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.
mikkyd
Posts: 7
Joined: Mon Mar 30, 2009 11:07 am

Post by mikkyd »

Thanks for your reply. Does it imply to US$ bank account & US$ Line of Credit??

Please correct me if I am right- As I understood that I can either bring it into Income statement in same year or carry forward in balance sheet and wait till it is realized. Pls confirm

Thanks,
baby_king_bob
Posts: 14
Joined: Tue Oct 13, 2009 7:00 pm

Post by baby_king_bob »

Correct -- you can choose to use either treatment, just be consistent year to year.
mikkyd
Posts: 7
Joined: Mon Mar 30, 2009 11:07 am

Post by mikkyd »

Thanks for the reply.

Does this imply to US$ account & US$ Line of credit also or only to Accounts Payables & Receiveables.

Thanks a ton for your help. I really appreciate it
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