Foreign Currency Translation and Risk
|6 Months Ended|
Jun. 30, 2011
|Foreign Currency Translation and Risk [Abstract]|
|Foreign Currency Translation and Risk|
Note 10: Foreign Currency Translation and Risk
During the first six months of 2011, we recorded foreign currency transaction gains of approximately $10.3 million. This amount was attributable to decreases in the amount of Polish zlotys necessary for FX Energy Poland to satisfy outstanding intercompany and other dollar-denominated loans and unpaid interest. There was a corresponding debit to other comprehensive income for gains attributable to the intercompany loans, which was then offset by translation adjustments related to our other balance sheet accounts.
The following table provides a summary of changes in cumulative translation adjustment (in thousands):
Future transaction gains or losses may be significant given the amount of intercompany loans and the volatility of the exchange rate. Future translation adjustments will also vary in concert with changes in exchange rates. These gains, losses, and adjustments are noncash items for U.S. reporting purposes and have no impact on our actual zloty-based revenues and expenditures in Poland.
We enter into various agreements in Poland denominated in the Polish zloty, which is subject to exchange-rate fluctuations. Our policy is to reduce currency risk by, under ordinary circumstances, transferring dollars to zlotys, or fixing the exchange rate for future transfers of dollars to zlotys, on or about the occasion of making any significant commitment payable in Polish currency, taking into consideration the future timing and amounts of committed costs and the estimated timing and amounts of zloty-based revenues. We do not use derivative financial instruments for trading or speculative purposes.
The entire disclosure for foreign currency transactions and translation. This may include description of foreign currency transactions, foreign currency gains and losses, explanation of change in cumulative translation adjustment, description of effect of subsequent foreign currency exchange rate change, cumulative translation adjustment movement, foreign currency translation adjustment by component movement, translation adjustment for net investment hedge movement, adjustment for long-term intercompany transactions, schedule of long-term intercompany balances and any other foreign currency transactions and translation related items.
Reference 1: http://www.xbrl.org/2003/role/presentationRef