Question
An American Company borrowed 1 million Canadian dollars to finance the construction of a new office building when the Canadian dollar was worth $1 American.
An American Company borrowed 1 million Canadian dollars to finance the construction of a new office building when the Canadian dollar was worth $1 American. At 10% interest, the American Company expected to pay back 1.1 million Canadian dollars which would be 1.1 million American dollars. Unfortunately, based on changes in the value of the Canadian dollar, the American Company must pay 1.1 million Canadian dollars but this costs the American Company 1.3 million American dollars. How will this extra $200,000 difference between what they actually paid and what they expected to pay be shown under U.S. GAAP? How would this have been shown if the American Company used IFRS? Which gives more relevant information to investors? Defend your choice.
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