What is the justification for the remeasurement of foreign currency transactions?
What will be an ideal response?
Remeasurement is needed for transactions denominated in a currency other than the entity's functional currency. A U.S. company that engages in transactions in other countries may have to remeasure some of its transactions. The implicit justification for remeasurement is that foreign currency transactions affecting monetary assets and liabilities have a direct effect on the entity's cash flows. There will be direct effects on future cash flows in the functional currency, and thus an effect on net income.
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