Foreign Currency Gain or Loss

Realized and Unrealized Gain/Loss Accounting Method

Under this method, fluctuation in exchange rates is considered Unrealized or Realized.

Balance sheet items having balances in foreign currencies are revalued in the current rate and are posted into the unrealized gain or loss account.

Exchange rate fluctuation is considered temporary and is not taken over to the Income Statement. In fact it is reversed in the next period.

At the time of settlement the gain or loss is then taken into the Income Statement and then it is permanent.

Recognized Gain/Loss Accounting Method

Here exchange gains or losses are recognized when a particular transaction or document is revalued, and it is revalued on the balance sheet date or settlement date.

All exchange gains or losses are considered permanent.

It could arise during settlement or revaluation (period end) and importantly, this is included in the Income statement for that period and is subject to tax for the recorded period.

During the ACCPAC set up (Common Services), the team members should be aware that "Recognized Gain/Loss Method" is a permanent selection and once it is selected you cannot revert back to "Gain/Loss Accounting Method".