A client which is a limited company and not part of a group has a long term Euro loan which I'm unceratin how to reflect in the yearend accounts. All loan drawdowns, interest payments, and repayments in the year are bookded at the going FX rate.
At the end of the year I planned to restate the loan using the b/s FX rate. If the rate has moved against the client resulting in a loss, the treatment is just dr P&L Unrealised FX loss and cr Loan account.
Then what if there's an FX gain? To take the whole gain to the P&L seems rash. For the sake of prudence shouldn't a gain be posted to reserves as FCTR and only movements in restating the FCTR be taken to the P&L? A few years back I seem to remember using an FCTR on consolidating overseas companies as means to account for FX on consolidation, but is FCTR used in single company accounts or is it only used on consolidation? If the answer is only to use FCTR on consolidation there would seem to be an inconsistency. Any thoughts. Many thanks Z.