Accounting entry for foreign exchange gains and losses on consolidation

Question

Accepted Answer

Foreign exchange gains and losses on consolidation are accounted for in the financial statements.

Foreign exchange gains and losses on consolidation are recognized in the income statement.
Gains or losses are calculated by comparing the functional currency of the subsidiary with the reporting currency of the parent company.
If the functional currency strengthens against the reporting currency, it results in a gain. If it weakens, it results in a loss.
The gain or loss is recorded in the income statement under a separate line item.
The corresponding entry is made in the foreign exchange reserve in the equity section of the balance sheet.
The gain or loss is also reflected in the consolidated financial statements.
Example: If a subsidiary's functional currency is the Euro and the parent company's reporting currency is the US Dollar, any gains or losses due to exchange rate fluctuations between the Euro and the Dollar will be accounted for in the financial statements.

Accepted Answer

When presentation currency is not equal to functional currency, take it to Equity.

If presentation currency is same as functional currency take fx difference to profit or loss.

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