How to run a month-end FX revaluation
If you hold balances in foreign currencies, their value in your reporting currency drifts with exchange rates. Revaluation books that drift correctly each month.
What FX revaluation does
When you hold a foreign-currency bank account, receivable, or payable, its value in your reporting currency changes as exchange rates move - even if the underlying amount does not. Revaluation restates those balances at the period-end rate and records the difference as an unrealized foreign-exchange gain or loss, so the balance sheet reflects current value.
Realized versus unrealized
| Type | When it happens | Trigger |
|---|---|---|
| Unrealized | At period-end while the balance is still open | Revaluing an open balance at the current rate |
| Realized | When the balance is settled | Actually receiving or paying in foreign currency |
Unrealized gains and losses come from revaluing balances you still hold; realized ones crystallize when you actually settle. Revaluation handles the unrealized side each period; settlement handles the realized side when cash moves.
The revaluation steps
- 1Identify every account holding a foreign-currency balance.
- 2Pull the period-end exchange rate for each currency.
- 3Restate each balance at the period-end rate.
- 4Post the difference to an unrealized FX gain or loss account.
- 5Reverse or carry forward per your policy, and document the rates used.
How Fintra automates revaluation
- Multi-currency accounting tracks the original currency and rate on every foreign transaction.
- FX revaluation restates open foreign balances at period-end rates automatically.
- Unrealized gains and losses post to the right accounts as part of the close.
- The rates used and entries booked are logged for the audit trail.
Frequently asked questions
What is an FX revaluation?
It is a month-end adjustment that restates foreign-currency balances at the current exchange rate. The change in reporting-currency value is booked as an unrealized foreign-exchange gain or loss, so open foreign balances on the balance sheet reflect their value at period-end rather than the original rate.
What is the difference between realized and unrealized FX gains?
Unrealized gains and losses arise from revaluing balances you still hold at period-end. Realized ones crystallize when you actually settle a foreign-currency balance and the cash rate differs from the booked rate. Revaluation handles the unrealized side; settlement records the realized side.
Which accounts need FX revaluation?
Any monetary balance held in a foreign currency - foreign bank accounts, foreign-currency receivables and payables, and intercompany balances in another currency. Non-monetary items like fixed assets are generally not revalued. The rule of thumb is: if it will settle in cash at a future rate, revalue it.
How often should I run FX revaluation?
Typically monthly, as part of the close, using period-end rates. Businesses with heavy foreign-currency exposure may revalue more often. The key is consistency - using the same rate source and timing each period so the FX gains and losses are comparable from month to month.
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