Foreign Currency Transactions and Translation

Foreign currency transactions are transactions occurring in the ordinary course of business (e.g., purchases, sales, borrowings, and lendings) denominated in a currency other than the office’s functional currency (as described below).
Foreign currency translation, on the other hand, is the process of translating financial statements from the foreign office’s functional currency into the reporting currency. Such translation normally is performed only at reporting dates.
A functional currency is the currency of the primary economic environment in which an office operates. For most banks, the functional currency will be the U.S. dollar. However, if a bank has foreign offices, one or more foreign offices may have a functional currency other than the U.S. dollar.
Accounting for foreign currency transactions

Tags: