Currencies, exchange rates & accounts software...

[Pish_Pash]

Just wondered what the consensus is here...it's especially relevant in times of high currency volatility like we've seeing going on globally over the past coupe of weeks.

Most accounts packages that have multi-currency have some form of 'go get' the exchange feature from an online server .....but all that 'go get' is, is a snapshot for that moment...it's not representative of the 'average exchange rate for the day'.

Scenario.

I import a sales transaction into Quickbooks at 09.30am... the market rate at that time is say £1=US$1.45. I tell Quickbooks to get the latest rate....it goes & pulls in 1.45 (actually it pulls in the reciprocal ...therefore US$1=£0.689655 - but that's not the main point here!). All fine

But at 1.30pm UK time, the US release some figures which are well received, so dollar strengthens markedly against the pound...let's say $1.4250.

Now just a couple of hours earlier, I updated quickbooks & it has the 'exchange rate' for the day at $1.45 .....which is - relatively speaking - way out!

I've just checked a couple of online accounts software offerings...they all seem to 'go fetch' currency rates every hour.

Doesn't HMRC much care about this? (because the alternative is to wait until the following day & calculate the 'average' rate for the day....& clearly not everyone is going to want to wait a day to get such data!). I guess you could argue, is that it should all even out in the wash over time? (some moves will be higher, some moves will be lower etc, etc.)


Now I realize, that one solution would be to use the published HMRC monthly rate...but frankly the days of keying in exchange rates when there are online servers aplenty to go & get exchange rates from seems retrograde - if only these online accounts software packages could be pointed to an HMRC's server then that would be the end of it - but they don't)

I'm just wondering if you ever get a visit from HMRC, how do you actually prove the rate you 'booked' for a given transaction in your accounts software, was actually a reflection of the underlying rate!

BTW, not enjoying the new forum 'look', yeah, yeah I know "Change is good" blah blah...but it looks very 'busy now' & is starting to feel as if it's lining up to go down a "We're gonna monetize this site until the pips squeak" type of path!).....all the piccies down the left are just 'visual noise'.

 

[Bob]

There is a post explaining how to get rid of the left hand side if you're using Chrome

 

[David Griffiths]

HMRC won't care about this. The rate allocated to the transaction is effectively a temporary measure. The definitive rate comes when the transaction is settled and money transferred to a sterling account. At that stage there will be a currency gain or loss posted so that everything balances out.

Xero handles currency transactions by converting at a spot rate when the transaction is posted (assuming it's posted on the actual day) using a rate from, I think, XE.com. That rate is automatically adjusted on the following day to the average for the date of the transaction.

Reports of outstanding invoices from the date of the transaction to the date of settlement are at the rate for the date of the report. Any fluctuations in that period are reported as unrealised currency gains (losses) When the transaction is finally settled, the fluctuations are reported as realised currency gains.

I think that works very well, and is the best that I've seen