Under U.S. GAAP, what is the proper treatment of unrealized foreign exchange losses?
A) They should be deferred on the Balance Sheet until the cash is paid.
B) They should not be recognized until cash is received to complete the transaction.
C) They should be recorded on the Income Statement in the period the exchange rate changes.
D) They should be deferred on the Balance Sheet until an offsetting foreign exchange gain is realized.

Question

Quizplus · Accepted Answer

Under U.S. GAAP, unrealized foreign exchange losses should be recognized on the Income Statement in the period the exchange rate changes. This is in accordance with the accrual basis of accounting, which requires recognition of expenses when they are incurred, regardless of when cash is paid or received. Thus, recognizing the loss at the time of the exchange rate change accurately reflects the economic reality of the transaction.

Under US GAAP, What Is the Proper Treatment of Unrealized Foreign