[cpaswag]

under current us gaap what would answer be if question had asked for us gaap? On June 1, year 1, ABC Co. issued a 200,000 euro purchase order for equipment to be supplied by a German company. ABC’s functional currency is the U.S. dollar. The equipment was delivered to ABC on November 1, year 1, and ABC recorded a payable due to the German company. ABC paid for the equipment on January 31, year 2. The following are the exchange rates in effect:

June 1, year 1 1 euro = 1.40 U.S. dollars November 1, year 1 1 euro = 1.50 U.S. dollars December 31, year 1 1 euro = 1.35 U.S. dollars January 31, year 2 1 euro = 1.30 U.S. dollars

Under IFRS, what is the foreign currency gain or loss that ABC should record for the year ended December 31, year 1?

Under IFRS (International Financial Reporting Standards), a foreign currency transaction should be recorded initially at the rate of exchange at the date of the transaction. At each subsequent balance sheet date, and at settlement, the transaction should be adjusted for the current amount, with differences being reported in profit or loss in the period incurred.

At 11/1, the liability was $300,000 (€200,000 × 1.5), and on 12/31, the liability had decreased to $270,000 (€200,000 × 1.35), for a gain of $30,000.