How to use the foreign currency receivable remeasurement calculator
- Choose whether the balance is a receivable (money owed to you) or a payable (money you owe).
- Enter the amount in the foreign currency.
- Enter the rate on the date of the transaction and the rate on the period end date, both as units of your home currency for one unit of the foreign currency.
- Read the value at each date and the exchange gain or loss.
Formula
Home value = foreign amount x rate, rounded to the cent
Receivable: gain = value at period end - value at transaction
Payable: gain = value at transaction - value at period end
A negative gain is a loss. The headline names it as a gain or a loss and shows the size.
A 50,000 foreign invoice when the foreign currency falls
You invoiced 50,000 of a foreign currency when the rate was 1.0850, so the receivable was recorded at $54,250. At the period end the rate is 1.0620 and the receivable is worth $53,100. The difference is an exchange loss of $1,150.
If the rate had risen to 1.1100 the receivable would be worth $55,500 and the result would be a gain of $1,250. For a payable the signs flip: a rise in the foreign currency makes what you owe larger, which is a loss, and a fall is a gain.
Why receivables and payables move in opposite ways
A receivable is an asset in the foreign currency, so when the foreign currency gets stronger, the asset is worth more in your home currency. A payable is a liability in the foreign currency, so when the foreign currency gets stronger, you owe more in your home currency. The same rate move helps one and hurts the other.
The gain or loss on an open balance is usually called unrealized until the invoice is settled. When it is settled, the rate on that day decides the final result. The Foreign Currency Purchase Tracker follows purchases made in another currency through to settlement.
Choosing the rate
The rates to use depend on your accounting policy and framework, such as a spot rate on the transaction date and the closing rate at the period end. Use rates from a source you can cite, and enter them to the same number of places throughout. If you only need a quick conversion, the Currency Converter lets you type the rate yourself, and the Currency Exchange Markup Calculator shows what a provider adds on top of a rate.
Once a balance is remeasured, you may want to see which invoices are still open. The Accounts Receivable Aging Report groups them by age.
Assumptions and limits
- Rates are quoted as home currency per one unit of foreign currency. If your source quotes the other way, take the reciprocal first.
- The amount is a single balance with no partial payments.
- Bid and ask spreads, hedges and settlement costs are not modeled.
- Where the gain or loss is reported depends on your accounting framework. This tool does the arithmetic only.
Frequently asked questions
Which way should the rate be quoted?
As the number of units of your home currency that buy one unit of the foreign currency. If your source gives the reverse, divide 1 by that number.
Why does a payable flip the result?
Because you owe the money. If the foreign currency gets more expensive, the debt costs more in your home currency, which is a loss.
Is the gain realized?
Not until the balance is settled. The figure here is the change in value between two dates, and the settlement rate decides the final amount.
Does the tool round the rates?
No. It multiplies the amount by the rate you type and rounds each home value to the cent.