Audit and Accounting Guide: Investment Companies

Appendix F Illustrations for Separately Calculating and Disclosing the Foreign Currency Element of Realized and Unrealized Gains and Losses

This appendix is nonauthoritative and is included for informational purposes only.

As discussed in paragraphs 1–2 of FASB Accounting Standards Codification (ASC) 946-830-45 each transaction denominated in a foreign currency can initially be measured only in that currency. The ongoing revaluation of investments and receivables or payables representing unsettled foreign currency transactions should be classified as unrealized foreign currency gain or loss. On settlement (when there is actual cash flow), a realized foreign currency gain or loss should be recorded. Any differences between originally recorded amounts and currently consummated or measured amounts in the reporting currency are a function of both of the following factors: (a) foreign exchange rate changes and (b) changes in market prices.

Illustrations A and B apply if separate disclosures of the foreign currency elements of unrealized and realized gains and losses on investments are chosen by the reporting entity.

A. Securities Purchases and Sales

As discussed in FASB ASC 946-830-45-20, if separate reporting of foreign currency gains and losses on sales of securities is chosen by the reporting entity, the realized fair value gain or loss on the sale of the security should be measured as the difference between the sale proceeds in foreign currency and the original cost in foreign currency ...