On November 30, 20X5, Bow Company received goods with a cost denominated in pounds. During December 20X5,

Question:

On November 30, 20X5, Bow Company received goods with a cost denominated in pounds. During December 20X5, the dollar's value declined relative to the pound. Bow believes that the original will be restored by the time payment is due in 20X6.

Required
a. State how Bow should report the impact, if any, of the changes in the of the dollar and the pound on its 20X5 financial statements.
b. Explain why the reporting is appropriate.

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...