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Balance Sheet Date before Date of Payment When the balance sheet date occurs before the...

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Accounting

Balance Sheet Date before Date of Payment

When the balance sheet date occurs before the date of payment, the issue of how to deal with unrealized foreign currency gains and losses arises. Firms are required to adopt an accrual approach and recognize unrealized gains and losses in income and balance sheet accounts should be revalued as of the balance sheet date.

Note: This is one of only two situations in U.S. GAAP where it is acceptable to recognize an unrealized gain in income.

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Example: Company Y sells 200,000 of product overseas on Dec 1when the spot rate is $0.75 per . On Dec 31, the spot rate is $0.80 per , and on Feb 1, when payment is received, the spot rate is $0.72.

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