AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
Part of the guideOne account, every currency: a guide for cross-border businesses
The short answer
Record each foreign-currency transaction in your functional currency at the rate on the day it happens. At each period end, retranslate monetary items (cash, receivables, payables, loans) at the closing rate and put the difference through profit or loss as an unrealised exchange gain or loss; non-monetary items such as stock and equipment stay at the original rate. When the invoice is settled, the difference between the last carrying value and the amount actually paid or received is the realised gain or loss.
Once a business invoices or pays in more than one currency, its books have to answer a simple question: what is this worth in our own currency, and when? The rules are much the same under IFRS (IAS 21), UK GAAP (FRS 102) and US GAAP. This article walks through them with numbers. For the operational side of holding several currencies, see our guide to multi-currency business accounts.
The rates you need
- Functional currency
- The currency of the main economic environment the business operates in, judged by the currency that drives its prices, costs and financing. It is a matter of fact, not choice. Presentation currency, the one the accounts are shown in, can be chosen.
- Spot rate on the transaction date
- Used to record each foreign-currency invoice, payment or receipt when it first goes in the books. Where rates are stable, an average rate for a week or month can be used as an approximation.
- Closing rate
- The rate at the reporting date. Used to retranslate monetary items at each month or year end.
- Historical rate
- The original transaction rate. Non-monetary items carried at cost stay at this rate.
Pick a rate source and use it consistently, for example the rate on your provider's statement or a recognised published rate, and document the choice. HMRC publishes monthly exchange rates for customs and VAT, which some small businesses also use as a reference, but for the accounts the rate should reflect the transaction date.
Monetary or non-monetary: what gets revalued
| Item | Monetary? | At period end |
|---|---|---|
| Foreign-currency bank balances | Yes | Retranslate at closing rate |
| Trade receivables and payables | Yes | Retranslate at closing rate |
| Loans in foreign currency | Yes | Retranslate at closing rate |
| Stock (inventory) bought in foreign currency | No | Stays at historical rate (subject to the usual impairment tests) |
| Equipment and other fixed assets | No | Stays at historical rate |
| Prepayments for goods or services | No | Stays at historical rate |
The test is whether the item is a right to receive, or an obligation to pay, a fixed or determinable number of currency units. Cash and invoices are; a machine is not.
Worked example: a €30,000 supplier invoice
A UK company with sterling as its functional currency buys €30,000 of stock on 10 March, payable in 40 days. Its year end is 31 March. The rates are illustrative.
| Date | Event | Rate (€ per £) | Payable in £ | Entry |
|---|---|---|---|---|
| 10 March | Invoice received | 1.1800 | £25,423.73 | Debit stock £25,423.73; credit payables £25,423.73 |
| 31 March | Year-end revaluation | 1.1650 | £25,751.07 | Debit exchange loss £327.34; credit payables £327.34 |
| 20 April | Invoice paid | 1.1720 | £25,597.27 | Debit payables £25,751.07; credit bank £25,597.27; credit exchange gain £153.80 |
Three points follow. The stock stays at £25,423.73: only the payable is revalued. The year-end accounts show an unrealised loss of £327.34, because the euro strengthened and the debt became more expensive in pounds. In the new year, a gain of £153.80 is recognised when the euro weakens before payment. Across both periods, the realised loss on the transaction is £173.54, the difference between £25,423.73 booked and £25,597.27 paid.
If the company had paid from a euro balance it already held, the payment would settle the payable in euros, and the exchange difference would sit in the revaluation of that euro bank balance instead.
Bank balances and realised versus unrealised
Foreign-currency cash is a monetary item, so it is revalued every period. Suppose a company holds $50,000 carried in its books at £38,000. If the closing rate is $1.33, the balance is worth £37,593.98, and an unrealised loss of £406.02 is recorded. Nothing has been sold; the loss reflects the rate.
- Unrealised gains and losses arise from retranslating items still open at the period end. Under IAS 21 and FRS 102 they go through profit or loss, like realised ones.
- Realised gains and losses arise when an item is settled or currency is converted, and lock in the final difference.
- Conversion fees are a cost of the transaction, not an exchange difference, so book them separately. That makes the true cost of conversion visible; see hidden FX margins.
- Reconcile in the original currency first. Each currency ledger should agree to the bank statement in that currency before it is translated.
A month-end routine that works for most small businesses:
- Reconcile each currency balance to its statement, in that currency.
- List open foreign-currency receivables, payables and loans.
- Retranslate every monetary item at the closing rate and post one revaluation journal per currency.
- Reverse or carry forward the revaluation, consistently with your accounting policy, so realised differences are correct when items settle.
- Review the size of the exchange line; a sudden jump can point to a missed booking rather than a market move.
How tax treats exchange differences
UK companies. Exchange gains and losses on money debts and loans are taxed under the loan relationship rules, and those on derivatives such as forwards under the derivative contracts rules. In most cases the tax follows the accounts, so no separate calculation is needed. There are special rules for hedges of overseas investments and for companies whose accounts are not in sterling. Unincorporated businesses follow different guidance.
US taxpayers. Under section 988 of the Internal Revenue Code, gains and losses on foreign-currency receivables and payables are generally ordinary and are recognised for tax when the item is settled, not when it is revalued. The gain or loss is the difference between the dollar value on the booking date and on the payment date. Businesses may use a spot-rate convention, such as a monthly rate, set at intervals of a quarter or less.
Elsewhere the rules differ, and intra-group loans in particular can produce taxable differences that surprise people. Ask an accountant to confirm the treatment, and if you are fixing rates in advance, read our guide to hedging currency risk.
Where Pryme fits
Pryme accounts hold GBP, EUR, USD and NGN in one place, with separate details for each currency, so each balance can be reconciled in its own currency. Swap shows the rate before you confirm and the fee on its own line, which makes it easier to book the exchange difference and the fee apart.
Pryme Intelligence builds the Finance agent that sits inside a Pryme business account: it prepares work inside a mandate you set, a person approves, and every action is recorded on an audit trail; nothing moves without approval. Before you choose any provider, ask what statement formats it exports and whether they import into your accounting software. Outside Nigeria, Pryme's services are provided through regulated partners. For the full picture, see the multi-currency business account guide.
Questions people ask
What is the difference between realised and unrealised FX gains?
An unrealised gain or loss comes from revaluing an open item, such as an unpaid invoice or a currency balance, at the period-end rate. A realised gain or loss arises when the item is settled or the currency converted. Under IFRS and UK GAAP both go through profit or loss.
Which exchange rate should I use for foreign invoices?
The spot rate on the date of the transaction, from a consistent source such as your provider's rate or a recognised published rate. If rates are stable, an average rate for a short period can be used as an approximation. Document the source you use.
Do I revalue stock bought in foreign currency?
No. Stock and fixed assets are non-monetary items and stay at the rate on the day you bought them. Only monetary items, such as cash, receivables, payables and loans, are retranslated at the closing rate.
Are FX gains taxable for a UK company?
Generally yes, and losses are generally deductible. For companies, exchange differences on loans and money debts fall under the loan relationship rules and broadly follow the accounting treatment. Special rules apply to some hedges and to non-sterling accounts.
Do I need a separate bank account for each currency?
Not necessarily, but you need a separate ledger for each currency that reconciles to a statement in that currency. A multi-currency account that reports each balance separately gives you that without opening several accounts.
Sources
- CPDbox: IAS 21 The Effects of Changes in Foreign Exchange Rates · accessed Oct 2026
- HMRC: Corporate Finance Manual CFM60010, foreign exchange overview · accessed Oct 2026
- HMRC: Corporate Finance Manual CFM61000, tax rules on exchange gains and losses · accessed Oct 2026
- UK Trade Tariff: HMRC monthly exchange rates · accessed Oct 2026
- IRS: International practice unit, section 988 transactions · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.