Foreign Currency Transaction Loss for ABC Corporation

Hard Multinational Operations Foreign Currency Transactions

ABC Corporation, a US-based company, imports machinery from a German supplier. The transaction involves an agreement to pay €1 million for the machinery, with the payment due in 90 days. At the time of the transaction, the spot exchange rate is 1.10 USD/EUR. During the 90-day period, the EUR appreciates, and the spot exchange rate changes to 1.20 USD/EUR. ABC Corporation does not hedge this currency exposure. What will be the impact on ABC Corporation's financial statements, specifically regarding foreign currency transaction gains or losses, once the payment is made?

ABC Corporation will recognize a foreign currency transaction loss of $100,000.

ABC Corporation will recognize a foreign currency transaction gain of $100,000.

ABC Corporation will recognize no foreign currency transaction gain or loss.

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