Foreign Exchange Revaluation

I know it is a complicated topic and I have checked the other posts on the same topic, but I cannot find any hint that allows me to understand the following:

As of today, Manager gives me Foreign exchange gains (losses) as follows:

The account “realised” is used to register manually some forex transactions losses/gains.

When I click on the figure of 8.045.055, I can see this:

However, if I go into Retained earnings, Foreign Exchange Revaluation is a lot higher and I cannot click anywhere to see the details of where this figure comes from:

Is this last revaluation a cumulated figure from the beginning of time when we started using Manager?

Could there be a guide on forex that explains exactly how Manager manages forex?

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Hi @mauroskov, It’s likely to be a cumulative figure since the first is coming from a Profit and Loss or a similar report and the second is from the Balance Sheet or a similar report, but we can’t tell for sure unless we know the source reports as well as the dates set for each report.

That’s a reasonable request, however, Foreign Currency accounting is undergoing changes at the moment, so adding to the current guide might add to the confusion as things change, instead of clearing the confusion.

But basically, the Foreign Exchange Revaluation account is the account used to record the discrepancy amount when a Foreign Currency outstanding position has been revalued in a financial account such as Bank and Cash Accounts, Customers, Suppliers, Employees, Expense Claim Payers and Special Accounts.

Let’s take – for example – the case of a UK based merchant importing a Fixed Asset from the USA and paying for it in USD. The Base Currency, in this case, is GBP.

Initially the invoice is recorded at the spot exchange rate of 0.8 GBP/USD and the Journal View for the Purchase Invoice should show something like this:

Suppose the supplier does not get paid as of 8/31/2023. Now the exchange rate changed to 0.7 GBP/USD. The currency revaluation will only affect the Financial Account which, in this case, is the Accounts payable part of the original transaction.

The $20,000 balance is now worth £14,000, however, the Machinery A Fixed Asset’s value will remain at £16,000. This creates a discrepancy in the books of £2,000 that has to be placed in some account in order to adhere to the double entry accounting – that account is the Foreign Exchange Revaluation account.

The following table illustrates how the discrepancy originates:

Account Original balance Balance after revaluation
Fixed assets, at cost £16,000 Dr £16,000 Dr
Accounts payable £16,000 Cr £14,000 Cr
Discrepancy £2,000 Dr

That difference will remain in Foreign Exchange Revaluation account until the original balance is finally realized in the Base Currency – i.e. paid for in GBP, such that no financial asset or liability stated in USD remain in the books.

Manager does not account for each individual transaction since that would require numerous calculations to be performed for each report at each set of dates used – which will hinder performance. Instead, Manager calculates the discrepancy for the entire account balance which works out to exactly the same discrepancy amount as when calculated for each transaction individually.

This is why you will not be able to get the breakdown for your Foreign Exchange Revaluation account.

@mauroskov there is going to be soon new way to revaluate foreign currency accounts. It will support automatic split between realized and unrealized forex gains too.

As a side-effect, it will also improve drilling down into Retained Earnings account.

So I suggest just wait for a few more days to see what the new approach is about.

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Excellent, many thanks in advance!

Hello hello , any news on this front? at the moment it’s quite confusing working with multiple currencies, unless you arbitrarily make a compensation thru the "currency revaluation"account.

@lubos as indicated also by @Vinix, are there any news on this issue of forex?