Gain or loss on the exchange of foreign currency must be considered separately from the underlying transaction (e.g. ,the purchase or sale of goods).

Question

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According to accounting standards, gains or losses on the exchange of foreign currency must be recorded separately from the underlying transaction. This is because fluctuations in currency exchange rates can impact the amount of money received or paid in a transaction, and must be accounted for separately in order to provide an accurate representation of the financial results of an organization. Failure to separate currency exchange gains or losses from underlying transactions can result in inaccurate financial reporting and analysis.

Gain or Loss on the Exchange of Foreign Currency Must