Businesses need to apply exchange rates when accounting for transactions involving foreign currencies and to assess exchange rate differences arising during and at the end of the accounting period.
1. How to account for foreign exchange rate differences arising during the period.
1.1. When purchasing supplies, goods, fixed assets, and services using foreign currency.
Debit 151, 152, 153... (actual exchange rate on the transaction date)
Debit 635 (exchange rate loss)
There are 111, 112 (according to the accounting exchange rate)
There is 515 (profit from CLTG)
1.2. When purchasing supplies, goods, fixed assets, or services but not yet paying, or when borrowing or incurring internal debt… in foreign currency, based on the actual exchange rate of the transaction on the date of the transaction, record the following:
Debit accounts 111, 112,
There are 331, 341, 336
1.3. When making an advance payment to the seller in foreign currency for the purchase of goods, fixed assets, or services.
The accountant records the advance payment to the seller at the actual exchange rate at the time of the advance payment as follows:
Debit 331 (actual exchange rate on the date of advance payment)
Debt 635 (CLTG loss)
There are 111, 112 (according to the accounting exchange rate)
There is 515 (profit from CLTG)
1.4. When receiving supplies, goods, fixed assets, or services from a seller.
+ For the value of materials, goods, and services corresponding to the amount of foreign currency advanced to the seller, record it at the actual exchange rate at the time of the advance payment:
Debit 151, 152, ...
There are 331 (actual exchange rate on the advance payment date)
+ For outstanding amounts, the accountant records them at the actual exchange rate at the time of the transaction (the date of the transaction).
Debit 151, 152... (actual exchange rate on the transaction date)
There are 331 (actual exchange rate on the trading day)
1.5. When paying off debts in foreign currency
Debit 331, 341 (accounting exchange rate)
Debt 635 (CLTG loss)
There are 111, 112 (accounting exchange rates)
There is 515 (profit from CLTG)
2. Accounting for exchange rate differences arising from the revaluation of monetary items denominated in foreign currencies.
2.1. When preparing financial statements, accountants revalue monetary items denominated in foreign currencies at the actual exchange rate in effect at the time of reporting.
If interest income from the exchange rate arises, record it as follows:
Debit accounts 1112, 1122, 128, 228, 131, 136, 138, 331, 341…
Credit in Account 413
If a CLTG loss occurs, record it as follows:
Debit of 413 Account
There are account numbers 1112, 1122, 128, 228, 131, 136, 138, 331, 341…
2.2. Accounting treatment of exchange rate differences arising from the revaluation of monetary items denominated in foreign currencies:
The accountant transfers the entire revaluation exchange rate difference (according to the offsetting of debit and credit entries in account 413) to account 635 or account 515 to determine the business operating results.
Debit 413 / Credit 515
Or Debit 635 / Credit 413
3. Regulations on exchange rates and exchange rate differences
Exchange rate differences mainly arise in the following cases.
- The actual buying, selling, exchanging, and payment of economic transactions arising in foreign currency during the period.
- Re-evaluate monetary items denominated in foreign currencies at the time of preparing the financial statements.
- Converting financial statements prepared in foreign currency to VND.
3.1. Principles for determining exchange rates and handling exchange rate conflicts
a/ Businesses apply the actual exchange rate to convert to the currency used for accounting purposes according to the following principle:
The actual exchange rate when buying and selling foreign currency (spot foreign exchange contracts, forward contracts, futures contracts, options contracts, swap contracts): is the exchange rate agreed upon in the foreign exchange contract between the enterprise and the commercial bank.
If the contract does not specify the exchange rate for payment, the enterprise shall record the transaction in its accounting books according to the following principle:
- The actual exchange rate used when recording accounts receivable: This is the buying rate of the commercial bank where the enterprise designates the customer to make payment at the time the transaction occurs.
- The actual exchange rate used when recording liabilities: This is the selling rate of the commercial bank where the enterprise expects to conduct the transaction at the time the transaction occurs.
- The actual exchange rate when contributing or receiving capital: This is the foreign currency buying rate of the bank where the enterprise opens an account to receive capital from investors on the date of capital contribution;
- For asset purchases or expenses paid immediately in foreign currency, the actual exchange rate is the buying rate of the commercial bank where the business makes the payment.
b/ Enterprises may choose to apply the book exchange rate according to the following principle:
The book exchange rate includes:
- Specific book exchange rate: This is the exchange rate used when recovering accounts receivable, deposits, or settling accounts payable in foreign currency, determined according to the exchange rate at the time the transaction occurs or at the time of revaluation at the end of the period.
- Moving weighted average exchange rate: This is the exchange rate used on the credit side of the cash account when making payments in foreign currency. This rate is determined by dividing the total value reflected on the debit side of the cash account by the total amount of foreign currency actually available at the time of payment.
c/ The exchange rate used to revalue monetary items denominated in foreign currency is the average end-of-period transfer rate of the commercial bank where the enterprise regularly conducts transactions (chosen by the enterprise itself) at the time of preparing the financial statements.
The entire exchange rate difference resulting from the revaluation of monetary items denominated in foreign currency (net amount after offsetting debit and credit entries in account 413) is transferred to financial expenses or financial operating revenue to determine the business operating results.
3.2. Principles of accounting for exchange rate differences
- Businesses must also track the original currency in detailed accounting records for the following accounts: cash, bank deposits, accounts receivable, accounts payable, and owner's equity.
- All exchange rate differences arising during the period are immediately reflected in accounts 515 and 635 of the reporting period.
- Businesses must revalue monetary items denominated in foreign currencies using the average end-of-period transfer exchange rate of the commercial bank where the business regularly conducts transactions at all times when preparing financial statements, as required by law.
- Companies are not allowed to capitalize foreign exchange gains into the value of work-in-progress assets.