Settlements for transactions in the field of foreign economic activity (hereinafter – FEA) are usually made in foreign currency. Such transactions are recorded in the national currency, which is UAH. As a result, currency translation in accounting results in exchange rate differences. Let's consider the rules for calculating exchange rate differences.
Exchange rate differences
Exchange rate difference is the difference between estimates of the same number of units of foreign currency at different exchange rates (item 4 NAS 21). To calculate exchange rate differences, it is necessary to take only the official exchange rate of the National Bank. Ukraine’s interbank exchange rate or cross-rate is not used for this purpose. For example, the difference between the NBU exchange rate and the exchange rate on the interbank foreign exchange market of Ukraine, which arises during the purchase of foreign currency, is not an exchange rate difference in the sense of NAS 21. In accounting it is credited either to income (Cr 711 “Income from the purchase and sale of foreign currency”, or to expenses (Dt sub-account 942 “Expenses for the purchase and sale of foreign currency”).
The peculiarities of accounting for foreign currency transactions also depend on which balance sheet item we are dealing with: monetary or non-monetary.
Exchange differences are calculated only on monetary items (item 8 NAS 21).
Monetary balance sheet items
Monetary items are cash balances, as well as assets and liabilities that will be received or paid in a fixed (or specified) amount of cash or cash equivalents, including:
- foreign currency on accounts;
- foreign currency liabilities for posted goods, received works and services;
- foreign currency debt for shipped goods, services and works;
- foreign currency loan arrears;
- arrears on repayable financial assistance in foreign currency;
- outstanding debt to the accountable person for approved expenses on a business trip abroad.
The determination of exchange rate differences on monetary items in foreign currency is carried out on the date of:
- balance sheet – using the exchange rate at the end of the balance sheet date;
- business transaction – using the exchange rate at the beginning of the day of the transaction. Determine the exchange rate differences on the date of the transaction or within the amount of the transaction, or for the entire article (in accordance with the accounting policy of the enterprise). It is also allowed to recalculate the balances at the end of the day on monetary items in foreign currency, on which during the day business transactions are carried out using the exchange rate set at the end of the day.
Non-monetary balance sheet items
Non-monetary items include any advances in foreign currency – received or transferred. They are recorded at the exchange rate of the NBU at the time of receipt or transfer of the advance and are not subject to recalculation on the balance sheet date.
Therefore, exchange rate differences are determined:
- exclusively on monetary items of the balance sheet;
- for each balance sheet date and date of the transaction;
- using the rate set by the NBU.
In view of the above, the calculation of the exchange rate difference (КР) is carried out according to the formula:
КР = Ʃго × (К2 - К1),
where Ʃго – the amount of business transaction (monetary item);
К1 – NBU exchange rate on the date of the transaction, on the balance sheet date;
К2 – NBU exchange rate on the date of determining the exchange rate difference.
