FAQ: FX Gain/Loss & Revaluation

Q: What is the difference between realized and unrealized FX gains/losses?

A: Realized FX gains/losses occur when you settle a foreign-currency transaction. For example, if you invoiced a customer in USD 100 at a rate of 1 USD = 80 AFN, and then received payment 30 days later when the rate was 1 USD = 82 AFN, you would record a gain on receipt of the USD (because AFN weakened). Unrealized FX gains/losses occur on open balances that have not yet been settled—these exist only on your books until the transaction is completed.

Q: How often should I revalue foreign balances?

A: Best practice is to revalue at the end of each reporting period (month-end, quarter-end, or year-end, depending on your reporting cycle). This ensures your balance sheet always reflects the current exchange rates and complies with accounting standards. Mid-period revaluations are not usually necessary unless you are reporting interim results or have a specific policy requirement.

Q: Do I need to revalue if I have only small foreign balances?

A: Even small balances should be revalued at period-end if the exchange rate has moved and your accounting policy requires it. Many jurisdictions require fair-value adjustments for all foreign currency positions. Consult your accounting policy or local requirements.

Q: What happens if the exchange rate hasn't changed?

A: If the exchange rate is the same as the rate on the original transaction date, there is no gain or loss to record. Usystems will show a zero adjustment, and no journal entry will be posted.

Q: Can I reverse a revaluation if I made a mistake?

A: Yes. You can reverse a revaluation by posting an opposite entry (e.g., if the original revaluation credited FX Gain, you can debit FX Gain and credit the revalued account). Most accounting practices are to post a reversing entry and then post a corrected revaluation. Consult your finance team on the best approach for your situation.

Q: Where can I see the FX gain/loss in my reports?

A: FX gains and losses appear in:

• Profit & Loss statements — as separate line items under operating income or other income/expense, depending on your account structure.
• Ledger reports — showing individual FX gain/loss entries and their amounts.
• Balance sheet — unrealized FX adjustments appear as part of account balances (the revalued amount).
• Transactions or Journal view — showing the posted revaluation entries.

Q: What exchange rate should I use for revaluation?

A: Use the exchange rate in effect on the revaluation date—typically the market rate published by your central bank, or a contracted rate if you have a forward contract. Ensure the rate is consistent with your company's policy and accounting standards. Input these rates into your Exchange Rates settings before running the revaluation.

Q: Can I revalue just one currency while leaving others unchanged?

A: Yes. During the revaluation process, you can select which currencies to revalue. You may revalue all foreign currencies or choose specific ones based on your needs.

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