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In certain cases, the actual exchange rate in a civil transaction in Vietnam may differ from the exchange rate recorded in the accounting books of enterprises and relevant authorities. This article will provide a detailed analysis of exchange rate differences in civil transactions in Vietnam.
Concept of Exchange Rate and Exchange Rate Difference
According to Clause 3, Article 2 of Circular 179/2012/TT-BTC, “Exchange rate” is the exchange rate between two currency units (sometimes abbreviated as “rate” in some legal documents or in communication). Determining the exchange rate is a crucial and complex process that directly impacts various aspects of the economy, from international trade activities to investment and finance.
Exchange rates can affect the prices of goods and services, as well as the profits and costs of internationally operating businesses. The management and adjustment of exchange rates are typically handled by financial authorities and central banks of each country. Decisions on increasing, decreasing, or maintaining stable exchange rates can be made to balance trade, control inflation, or achieve other financial and economic goals.
Exchange rates are also commonly used in international trade agreements and investment contracts to determine the value of transactions in different currencies. Understanding and monitoring exchange rate fluctuations is vital for managing risks and optimizing international business operations.
According to Clause 1, Article 69 of Circular 200/2014/TT-BTC, an exchange rate difference arises from the actual exchange or conversion of the same amount of foreign currency into the accounting currency unit at different exchange rates. This difference arises from the disparity between the actual exchange rate and the exchange rate converted into the accounting currency unit. This means that when conducting business transactions or evaluating assets, liabilities, and other currency-related items, there is a fluctuation between the value recorded in accounting documents and the actual value of the transaction or asset.
Cases of Exchange Rate Differences
Exchange rate differences often arise in the following situations:
- Commercial and financial transactions: During the process of buying, selling, exchanging, and settling economic transactions using foreign currencies, the actual exchange rate used to convert the transaction value creates exchange rate differences between this rate and the accounting conversion rate.
- Revaluation of assets and liabilities: When revaluating foreign currency-denominated asset or liability items at the time of financial statement preparation, the actual exchange rate applied to calculate their value creates exchange rate differences.
- Financial statement conversion: When converting financial statements from foreign currencies to the national currency (e.g., Vietnamese Dong), exchange rate differences arise due to the disparity between the actual exchange rate and the accounting conversion rate.
Exchange rate differences can significantly impact an organization’s business results and financial reports if not properly addressed or if overlooked, considering that even minor differences may seem insignificant. However, on a large scale, small discrepancies, even as little as 0.01%, can amount to several billion, or even tens of billions of VND, making it essential for businesses to understand basic concepts and factors influencing exchange rate differences.
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