The foreign exchange legislation in Venezuela moved into
a new phase early this year. The exchange mechanism is a moving
target that continues to challenge overseas parents.
Most entities with foreign operations are familiar with the
judgment on functional currency so the rest should be easy –
right? Once the functional currency is selected, simply translate
it. In some countries however, it is not that simple.
Let's take Venezuela. Exchange rate legislation in Venezuela
was amended earlier this year to create a new mechanism (SICAD II).
Prior to this, there were two official exchange rates (CENCOEX and
SICAD I). SICAD II introduces the ability for both individuals and
entities to buy and sell foreign exchange with significantly fewer
restrictions than other mechanisms. If SICAD II operates as
described, it seems like good news for entities trying to get funds
out of Venezuela. But what are the accounting implications?
