Currency Revaluation
This guide explains how to use Currency Revaluation to adjust your foreign currency balances to current exchange rates. Whether it's month-end or year-end closing, this process ensures your financial statements accurately reflect the value of foreign currency assets and liabilities.
What is Currency Revaluation?
Currency Revaluation adjusts the book value of foreign currency balances to reflect current exchange rates. When exchange rates change between when you recorded a transaction and period-end, the value in your base currency changes—even though the foreign currency amount stays the same.
Why does this matter?
| Reason | Example |
|---|---|
| Accurate balance sheet | Your $10,000 USD receivable was worth 14.5M IQD when recorded, but is now worth 14.7M IQD |
| Regulatory compliance | IFRS and most accounting standards require period-end revaluation |
| Financial visibility | See unrealized gains/losses before they become realized |
| Month-end closing | Required step before finalizing monthly financial statements |
Accounting Impact: A revaluation adjustment recognizes unrealized exchange gains or losses in your Profit & Loss statement, while adjusting the book value of your foreign currency accounts.
Where to Find It
Navigate to: Accounting → Currency Revaluation
You'll see a list of all revaluations with their status, date, and net adjustment amounts.
[!TIP] Run currency revaluation at the end of each accounting period (monthly, quarterly, or annually) before generating financial reports.
Currency Revaluation Workflow
Your revaluation goes through these stages:
┌─────────┐ ┌─────────┐ ┌──────────┐ │ Draft │ ──▶ │ Posted │ ──▶ │ Reversed │ └─────────┘ └─────────┘ └──────────┘ 📝 ✅ ↩️
📝 Draft
- System calculates unrealized gains/losses
- You can review and modify if needed
- No accounting impact yet
- Safe to delete if not needed
✅ Posted
- Journal entry created
- Gains/losses recorded in P&L
- Balance sheet accounts adjusted
- Can be reversed if needed
↩️ Reversed
- Offsetting journal entry created
- Useful if you need to re-run revaluation with different rates
How the Calculation Works
For each foreign currency balance, the system calculates:
Book Value = Foreign Balance × Historical Rate
Revalued Amount = Foreign Balance × Current Rate
Adjustment = Revalued Amount - Book Value
Example: You have $10,000 USD in accounts receivable
| Factor | Value |
|---|---|
| Foreign Balance | $10,000 USD |
| Historical Rate | 1 USD = 1,450 IQD |
| Book Value | 14,500,000 IQD |
| Current Rate | 1 USD = 1,470 IQD |
| Revalued Amount | 14,700,000 IQD |
| Adjustment (Gain) | +200,000 IQD |
Which Accounts Are Affected?
Currency revaluation primarily affects accounts with foreign currency balances:
| Account Type | Example Accounts |
|---|---|
| Accounts Receivable | Customer invoices in USD, EUR, etc. |
| Accounts Payable | Vendor bills in foreign currencies |
| Bank Accounts | Foreign currency bank accounts |
| Loan Accounts | Foreign currency loans given or received |
[!IMPORTANT] Only accounts with foreign currency transactions (different from your base currency) will show revaluation adjustments.
Creating a Currency Revaluation
Step 1: Start the Revaluation
- Go to Accounting → Currency Revaluation
- Click Create Currency Revaluation
Step 2: Fill in the Details
| Field | What to Enter | Example |
|---|---|---|
| Revaluation Date | The date for rate lookup | Last day of month (Dec 31) |
| Description | Optional note | "December 2025 month-end revaluation" |
Step 3: Review Calculated Lines
The system automatically:
- Finds all accounts with foreign currency balances
- Looks up current exchange rates for the revaluation date
- Calculates the adjustment for each account/currency/partner combination
You'll see for each line:
- Account: The account being revalued
- Currency: The foreign currency
- Foreign Balance: Amount in foreign currency
- Historical Rate: Average rate when transactions were recorded
- Current Rate: Rate on revaluation date
- Book Value: Current book value in base currency
- Revalued Amount: New value at current rate
- Adjustment: The difference (gain or loss)
Step 4: Review Totals
Before posting, verify the totals:
- Total Gain: Sum of all positive adjustments
- Total Loss: Sum of all negative adjustments
- Net Adjustment: Overall gain or loss
Step 5: Post the Revaluation
Once satisfied, click Post to:
- Create the journal entry
- Lock the revaluation record
- Update financial statements
What Happens Behind the Scenes
When you post a revaluation with a net gain of 200,000 IQD on accounts receivable:
┌─────────────────────────────────────────────────────────────┐
│ Dr. Accounts Receivable 200,000 IQD │
│ Cr. Unrealized Exchange Gain 200,000 IQD │
└─────────────────────────────────────────────────────────────┘
In plain English: We're increasing the book value of our receivables to match the current exchange rate, and recording the gain in our income statement.
For a net loss of 150,000 IQD on accounts payable:
┌─────────────────────────────────────────────────────────────┐
│ Dr. Unrealized Exchange Loss 150,000 IQD │
│ Cr. Accounts Payable 150,000 IQD │
└─────────────────────────────────────────────────────────────┘
Common Scenarios
Scenario 1: Month-End Closing
The situation: It's January 31st and you need to close the month. Your company has USD receivables and EUR payables.
What to do:
- Ensure exchange rates for January 31st are recorded in the system
- Create a new Currency Revaluation
- Set Revaluation Date to January 31st
- Review the calculated adjustments
- Post the revaluation
- Generate your month-end financial reports
Result:
- Balance sheet shows foreign currency items at current values
- P&L includes unrealized exchange gains/losses
- Trial balance is ready for period close
Scenario 2: Year-End Audit Preparation
The situation: Auditors need to verify foreign currency valuations for year-end.
What to do:
- Verify year-end exchange rates are accurate and documented
- Create a revaluation for December 31st
- Export or print the revaluation report showing:
- Each foreign currency balance
- Historical vs. current rates
- Adjustment calculations
- Post the revaluation
- Provide the report and journal entry to auditors
Scenario 3: Correcting a Wrong Revaluation
The situation: You posted a revaluation but discovered the exchange rate was incorrect.
What to do:
- Reverse the posted revaluation (creates offsetting entry)
- Update the exchange rate in the system
- Create a new revaluation with the correct rate
- Post the new revaluation
Filters and Options
The revaluation list provides filtering options:
| Filter | Purpose |
|---|---|
| Status | View only Draft, Posted, or Reversed revaluations |
| Date Range | Find revaluations for specific periods |
| Search | Find by description or reference |
Best Practices
📅 Timing
- Revalue at period-end: Always before closing monthly, quarterly, or annual books
- Document rates: Ensure exchange rates are recorded for each revaluation date
- Consistent timing: Use the same day each period (e.g., last business day)
✅ Accuracy
- Verify rates: Double-check exchange rates before posting
- Review large adjustments: Investigate unusually large gains/losses
- Reconcile first: Ensure bank reconciliation is complete before revaluation
🔒 Controls
- Audit trail: Keep documentation of rate sources
- Sequential revaluation: Don't skip periods—revalue in sequence
- Review before posting: Have a second pair of eyes on significant adjustments
Troubleshooting
No Lines Calculated
Check:
- Do you have foreign currency transactions?
- Are exchange rates recorded for the revaluation date?
- Is the current rate different from the historical rate?
"Cannot Post" Error
Check:
- Is there at least one revaluation line?
- Is your company's default gain/loss account configured?
- Is the revaluation date within an open accounting period?
Unexpected Adjustment Amounts
Check:
- Verify the historical (weighted average) rate is correct
- Confirm the current exchange rate for the revaluation date
- Check if there are multiple transactions at different rates
Frequently Asked Questions
Q: How often should I run currency revaluation?
A: At minimum, run revaluation before closing each accounting period (monthly or quarterly). Many companies run it monthly for accurate interim reporting.
Q: What happens when the foreign currency transaction is settled?
A: When you receive payment or pay a bill, the system calculates the realized exchange difference. The unrealized adjustment from revaluation is effectively reversed as part of the settlement.
Q: Can I revalue specific accounts only?
A: The system processes all eligible foreign currency accounts. You cannot exclude specific accounts from a revaluation run.
Q: Does revaluation affect my tax reporting?
A: Unrealized gains/losses may or may not be taxable depending on your jurisdiction. Consult your accountant for tax treatment guidance.
Related Documentation
- Payments - Handling multi-currency payments
- Opening Balances - Setting up initial foreign currency balances
- Vendor Bills - Creating bills in foreign currencies
- Customer Invoices - Creating invoices in foreign currencies
Currency revaluation is essential for accurate financial reporting when dealing with multiple currencies. By regularly running revaluations at period-end, you ensure your balance sheet reflects true economic values and your P&L captures exchange rate movements.