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Expected foreign exchange gains and losses are determined by the amount of foreign exchange rate exposure times the change in the future spot rate. Foreign
Expected foreign exchange gains and losses are determined by the amount of foreign exchange rate exposure times the change in the future spot rate. Foreign exchange rate exposure is the possibility that a firm will gains or lose because a change in the foreign exchange rate. Translation rate exposure is the exposure that results when the firm exchanges one currency for another currency. Foreign exchange rate exposure is the sum of exposed assets minus the sum of exposed liabilities. FASB-52 uses the all current rate for translating foreign exchange gains and losses. The functional currency is the currency of the primary economic environment in which the entity operates. Hyperinflation is three year cumulative inflation of 80%, or more. Transaction gains and losses can be reported to retained earnings. If the foreign currency of the country in which the subsidiary is located depreciates, the value of the subsidiary will decrease. Economic exposure is determined by the effect of the foreign exchange rate change on sales price, sales volume, and costs
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