Reduction of the fluctuations of profit and loss in the financial statements from the exchange rate a case study of Coal Power Company Limited

Abstract

The objective of this study is studying the reduction of the fluctuations of profit and loss on exchange rate in the financial statements a case study of Coal Power Company Limited. The company having to fluctuate of gain/loss of foreign exchange rate in financial statements because the company has assets in foreign currencies that are higher than liabilities in foreign currencies when baht appreciation or depreciation it will immediately affect to the income statement.

From the mentioned problem, there is a study to find financial instruments or financial reporting standards or accounting standards that can be applied to reduce the volatility of fluctuate of gain/loss of foreign exchange rate in financial statements.

The result of studies found that hedging accounting can be used to reduce the fluctuation of gain/loss of foreign exchange rate in financial statements, which will make the foreign exchange gains and losses that appear in the income statements more consistent by using expenditure hedging. The accountant will be recognized as foreign currency expenses by specifying the exchange rate on the date that the apply hedge accounting. When a foreign currency expense transaction occurs as a result, foreign exchange gains and losses in the financial statements have not fluctuated.  This accounting recognized applies in accordance with financial reporting standards No. 9 Financial instruments, however, financial management requires the use of financial instruments to reduce the volatility of foreign exchange gains and losses in cash at the same time.