Professional Documents
Culture Documents
SUBJECT:
1.0
RATIONALE
Fluctuations in foreign currency which affect the day to day operations of National
Government Agencies and Local Government Units are not reflected in the books of
accounts except for agencies adopting the commercial accounting system in the
treatment of foreign currency transactions. Due to the absence of prescribed accounting
guidelines on foreign currency adjustments, foreign currency transactions are still
recorded at historical cost, hence, abnormal balances exist in the accounts. The
promulgation of guidelines and procedures in the accounting for foreign currency
adjustments will provide a common basis in the recording and reporting of foreign
currency transactions to enable agencies to present relatively fair and accurate financial
statements.
2.0
PURPOSE
This Circular is issued to provide accounting guidelines and procedures for foreign
currency transactions of National Government Agencies and Local Government Units.
3.0
COVERAGE
This Circular shall cover the following foreign currency transactions of National
Government Agencies (NGAs) and Local Government Units (LGUs):
a)
b)
c)
d)
e)
4.0
DEFINITION OF TERMS
The terms used in this Circular shall be construed to mean as follows:
4.1
Exchange rate is the ratio at which the currencies of two countries are exchanged
at a particular time.
4.2
5.0
4.3
4.4
4.5
4.6
4.7
Relent loans are loans directly contracted by the Republic of the Philippines and
subsequently loaned out to government corporations.
4.8
4.9
Trust receipts are collections from non-income sources authorized by law for
specific purposes which are collected/received by a government office or agency
acting as trustor, agent or administrator, or amounts received as guaranty for the
fulfillment of an obligation.
GENERAL GUIDELINES
5.1
5.2
When there is a change in the exchange rate between two related transactions, the
resulting exchange differential shall be recorded as follows:
5.3
5.2.1
if settled within the same accounting period, the difference shall be treated
as gain or loss;
5.2.2
Foreign currency deposits shall be revalued monthly at the exchange rate prevailing
at the end of the accounting/reporting period. Exchange differences resulting from
the revaluation of foreign currency deposits shall be credited or charged to
income/loss or trust liability.
6.0
5.4
Foreign borrowings shall be revalued at the exchange rate prevailing at the end of
the accounting/reporting period. Exchange differences resulting from revaluation of
foreign borrowings shall be recorded as adjustment to loans payable and invested
capital accounts.
5.5
FAS shall be recorded at the exchange rate existing at the date of the transaction.
The liquidation thereof shall also be recorded at the exchange rate used at the date
the FAS was granted.
5.6
5.7
A change in exchange rate occurring after the balance sheet date or before
February 24, if significant shall be disclosed. The net effect of changes in foreign
exchange rates in the accounts shall be disclosed in the financial statements.
SPECIFIC GUIDELINES
6.1
6.1.3
6.1.4
6.1.5
6.1.6
6.2
6.2.2
6.2.3
Deposits made by LGUs with AGDBs shall also be recorded at the exchange
rate prevailing at the date of deposit.
6.2.4
6.2.5
6.3
6.4
6.3.2
6.3.3
6.3.4
6.3.5
6.5
7.0
6.4.2
6.4.3
6.5.2
Deposits per letters of Credit (LCs) based on the amount of the Purchase
Order or Contract shall be recorded as marginal deposits by the agencies
concerned.
6.5.3
In cases where the bank/local treasury pays more or less than the amount of
the LC due to currency fluctuations, proper adjustments shall be effected in
the agency's books of accounts.
8.0
SAVING CLAUSE
Cases not covered by this Circular shall be referred to this Commission.
9.0
REPEALING CLAUSE
All circulars, memoranda or other issuances which are inconsistent with this Circular
are hereby rescinded and repealed accordingly.
10. EFFECTIVITY
This Circular shall take effect immediately.
(SGD.) PASCASIO S. BANARIA, Chairman
(SGD.) ROGELIO B. ESPIRITU, Commissioner
(SGD.) SOFRONIO B. URSAL, Commissioner