In mid-May 2010, the Venezuelan government took over control of the previously unregulated “parallel” currency market, which had enabled entities to use brokers to exchange foreign currency without having to purchase the currency from Venezuela’s Commission of the Administration of Foreign Exchange (CADIVI). At the same time, the Venezuelan government suspended foreign currency trading that used this unofficial market. On June 4, 2010, Venezuela published a new exchange law (Convenio Cambiario No. 18) and is expected soon to introduce currency exchange bands under a newly regulated parallel system controlled by the Central Bank of Venezuela (BCV).

Deloitte’s Financial Reporting Alert 10-1, Venezuela’s Currency Exchange Controls and Highly Inflationary Status, discusses in part whether an entity may use the parallel exchange rate to remeasure its foreign currency transactions. The Alert indicates that an entity must consider whether the parallel market is readily available and legally accessible when determining the appropriate exchange rate to use. Recent events in Venezuela may affect an entity’s decision on the rate to use for remeasurement of foreign currency transactions.

We will provide updates as more information becomes available.

Entities are encouraged to consult with their professional advisers regarding the impact of these recent events in Venezuela on their financial reporting.