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Foreign exchange rates and valuation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Foreign exchange rates and valuation

  • This topic has 1 reply, 2 voices, and was last updated 9 years ago by MikeLittle.
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  • March 10, 2016 at 4:48 pm #305330
    nari
    Member
    • Topics: 261
    • Replies: 176
    • ☆☆☆

    Hello Mike
    If a company has foreign currency lets say USD bank accounts with different banks, is it ok for them to value it in local currency lets say LCD using the fx rates given by the various bank or should there be one consistent rate used across all bank accounts when converting to the local currency?
    Also, would the answer be different if :
    1.the functional currency is USD while the local currency is LCD
    2.the functional and local currency are the same.

    I’m asking because I came across a situation where there were 4 bank accounts and they each were valued using 4 different exchange rates (which were the fx rates for the respective banks)

    March 10, 2016 at 11:48 pm #305433
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23303
    • ☆☆☆☆☆

    I have no idea (and it’s certainly not a topic for F7)

    At a guess, I don’t see how you can dictate to a bank what rate of exchange the bank should be using

    In addition, the rates used by different banks cannot be so different as to create a material variance

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