From the course: Finance and Accounting Tips (2018)

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Foreign currency transactions

Foreign currency transactions

From the course: Finance and Accounting Tips (2018)

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Foreign currency transactions

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- When a U.S. company sells a good or provides a service to a party in a foreign country, the transaction amount is frequently denominated, that means stated or contracted in U.S. dollars. - The U.S. dollar is a relatively stable currency and buyers from Azerbaijan to Zimbabwe are often eager to avoid the uncertainty associated with payments denominated in their relatively unstable local currencies. - For example, no matter where they're located, buyers and sellers of crude oil almost always write the contract price in terms of U.S. dollars. - When a U.S. company accounts for a sales contract with a foreign buyer with a sales price denominated in U.S. dollars, the accounting for the contract is the same as if the buyer were a U.S. buyer. - It is the foreign buyer's responsibility to acquire U.S. dollars with which to satisfy the contract and the foreign buyer is at risk when it comes to change and exchange rates. - And that is what this video is getting at. There are additional risks…

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