Accounting For Foreign Currency Loss

This may answer your question. From EU IAS 7

"28 Unrealised gains and losses arising from changes in foreign currency exchange rates are not cash flows. However, the effect of exchange rate changes on cash and cash equivalents held or due in a foreign currency is reported in the statement of cash flows in order to reconcile cash and cash equivalents at the beginning and the end of the period. This amount is presented separately from cash flows from operating, investing and financing activities and includes the differences, if any, had those cash flows been reported at end of period exchange rates. "

Gurav:

At last reading of IFRS/GAAP for preparation of the Statement of Cash Flows, translation adjustments are non-cash items added/subtracted from net income. Line item mush as depreciation.

David

Gaurav,
My understanding is that any Unrealized Fx gain or loss is on account of translation of Monetary Assets/Liabilities that are that are not in the functional currency impacts the Income statement hence it needs to be added back in the Cash Flow statement. For eg if a company having USD as the functional currency has AR, AP etc in Euros(along with USD AP or AR) then any restatement at the end of the period of the Euro AR and AP would result in Gains/Losses impacting the Income Statement. This is then added back in the cash flow as it is non cash in nature.

Intercompany loans are not generally settled, so if you are remeasuring the loan under ASC830 and it impacts the P&L it would be a non-cash item that you would address in your indirect cash flow statements. This is distinct from the impact of FX on Cash that is separately reported on the cash flow statement. It is a great question because so many people treat this incorrectly, either failing all together to recognize the non-cash nature of intercompany transactions (loans or short-term) or classifying the gain or loss as the impact of FX on cash.

Be mindful how you determine your change in working capital as you may already have the fx impact captured within. In that case, you would be 'doubling' if you were to adjust net income for non-cash items as well.