1. Recognize that transactions denominated in a foreign currency are now quite common.
2. Understand the necessity of remeasuring foreign currency balances into a company’s functional currency prior to the preparation of financial statements.
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3. Appreciate the problem that fluctuations in exchange rates cause when foreign currency balances are reported in a set of financial statements.
4. Know which foreign currency balances are reported using a historical exchange rate and which balances are reported using the exchange rate in effect on the date of the balance sheet.
5. Understand that gains and losses are reported on a company’s income statement when certain foreign currency balances are remeasured using new currency exchange rates.