Foreign Currency Transaction Gain Recognition

Medium Multinational Operations Foreign Currency Transactions

A multinational corporation, XYZ Ltd., has subsidiaries operating in both the Eurozone and the United States. In the current fiscal year, XYZ Ltd. sold goods to its European subsidiary valuing €200,000. The transaction was executed on June 15 when the spot exchange rate was 1.10 USD/EUR. The payment for these goods was received on September 15, when the spot exchange rate was 1.15 USD/EUR. How should XYZ Ltd. report the gain or loss from this foreign currency transaction on its financial statements?

XYZ Ltd. should recognize a foreign currency gain of $10,000.

XYZ Ltd. should recognize a foreign currency gain of $5,000.

XYZ Ltd. should recognize no gain or loss as the transaction was considered a sale.

Hint

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