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Foreign currency hedge accounting: multi‐currency versus functional currency accounting

Orapin Duangploy (Professor of Accounting, University of Houston‐Downtown, Houston, USA)
Dahli Helmi (Accounting Professor, Wilson College, Chambersburg, USA)

Managerial Auditing Journal

ISSN: 0268-6902

Article publication date: 1 July 2000



Auditors nowadays must be aggressive and involved in risk assessment and analysis. This paper identifies, analyzes, and recommends a solution to a current problem in accounting for foreign‐currency hedges. This is accomplished by an examination of the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivatives Instruments and Hedging Activities, as issued in June 1998. Multi‐currency accounting is recommended as an alternative to functional‐currency accounting. The information generated by the multi‐currency versus the functional currency (as advocated in the SFAS 133) accounting methods for using options as hedging instruments is illustrated. Multi‐currency accounting excels in its transparency. It more clearly provides information on the respective exposure positions of the hedged items and the hedging instruments as well as the notional amounts. Auditors’ risk assessment and analysis can now be effectively performed under this system.



Duangploy, O. and Helmi, D. (2000), "Foreign currency hedge accounting: multi‐currency versus functional currency accounting", Managerial Auditing Journal, Vol. 15 No. 5, pp. 232-246.




Copyright © 2000, MCB UP Limited

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