Question: In today’s global economy, many U.S. companies make a sizable amount of their sales internationally.
The Coca-Cola Company, for example, generated approximately 74 percent of its revenues in 2008 outside North
America. In such cases, U.S. dollars might still be the currency received. However, occasionally and sometimes
often, U.S. companies make sales that will be settled in a foreign currency such as the Mexican peso or the
Japanese yen. What reporting problems are created when a credit sale is denominated in a foreign currency?
Answer: This situation is a perfect example of why having an authoritative standard for financial accounting, such
as U.S. GAAP, is so important for communication purposes. Foreign currency balances are extremely common
in today’s world. For many companies, sales, purchases, expenses and the like can be denominated in dozens of
different currencies. Mechanically, many methods of reporting such figures are available. Without standardization,
decision makers would likely be faced with analyzing similar companies possibly reporting foreign balances in a
variety of ways. Assessing the comparative financial health and future prospects of organizations using different
types of accounting will always pose an extremely difficult challenge.