Unrealised foreign exchange gain and loss is moved through equity while realised gain and loss is charged to profit and loss.
Unrealized foreign exchange gain or loss should be entered as Earnings Before Interests and Tax. To calculate, subtract operating expenses from operating revenue. Add any non-operating income for the total.
Foreign exchange gain or loss is audited as unrealized income on the balance sheet when it occurs. This gain or loss then becomes realized income once it is paid or settled.
Although there are some exceptions, in most situations, the EBITDA (or Earnings Before Interest, Taxes, Depreciation and Amortization) does allow for unrealized foreign exchange gain.
When the cash in the bank account is sold at a currency other than its denomination.
Unrealised foreign exchange gain on non-cash, monetary items are included in P&L, but non-monetary items such as prepayments for goods and services, PPE, inventory are not translated using historical exchange rate at transaction date and subsequently not revalued.
Effect of exchange rate changes will be shown under "Cash & Cash Equivalents - at [opening]". We will also show such item under the Heading of "Cash flows from operating activities" for the unrealized gain/loss on foreign exchange.
It's a foreign exchange gain or loss, so when you exchange currencies, you can either make a gain or a loss from it (profit or loss).
An appreciation in a foreign currency creates a foreign exchange gain when the foreign currency is to be received. A decrease in the value of foreign currency creates a foreign exchange gain when the foreign currency is to be paid. (Hoyle, Schaefer, Doupnik, 2009, pp. 328)
Is an unrealized loss reported to IRS?
It is an unrealized gain / loss. It is a restatement of the value of a balance in a certain currency, in relation to the base currency of the balance. Realized gains / losses are for 'finalized' transactions, such as outstanding vendor amounts paid or customer amounts received and there is a loss or gain realized at that point. (this happens when there is a big fluctuation between the date the transaction is executed and the date the money changes hands)
Foreign exchange gains are taxable but they are taxable with different rate of tax then actual normal profit of business.
No generally, it is not taxable until the gain/loss is recognized.