Determining the initial exchange rate date for transactions can be confusing. FAS52 is the guideline used for Generally Accepted Accounting Principles (GAAP) regarding foreign currency transactions. In FAS52, the date indicated is the "transaction" date. The foreign currency gain or loss will be measured as the difference between the exchange rate values at the transaction date versus the settlement date. The settlement date is usually the date the invoice is paid. What is the transaction date? Generally, it is the date you receive the materials from your vendor or the date services are rendered. The purchase order date is not typically the transaction date but is a commitment to purchase the items listed, before the actual consumption of services or receipt of material has occurred. Some companies will use the invoice date because it usually approximates the date the materials were received or services were rendered and many vendors will date their invoice to coincide with the transaction date. We also suggest that you consult with your external accountant to verify what transaction date you should use since they know your business and the circumstances of how your transactions flow.
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