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The short answer
An exchange gain or loss appears when the CAD value of a naira or dollar amount changes between the day you record it and the day you settle or revalue it. If the invoice has been paid, the difference is realised; if the balance is still open at a reporting date and you revalue it, the difference is unrealised. Record both in a separate exchange gain or loss account, keep the rates and their sources, and let your accountant confirm the tax treatment.
Why the difference appears at all
A Canadian business records its books in Canadian dollars. When a Lagos supplier bills you in naira, the bill goes into the ledger at a CAD value based on that day's rate. Weeks later you pay it, and the rate has moved. The naira amount is the same; the CAD it cost you is not. That gap has to go somewhere, and it belongs in an exchange gain or loss account rather than being quietly added to the expense.
The CRA tells corporations to convert using "the Bank of Canada daily exchange rate, to 4 decimal places, of the particular day" (functional currency page, September 2026). The Bank's daily table does not include the naira (checked 23 October 2026), so naira entries rely on a documented method, as set out in keeping books in CAD with naira and USD transactions.
Realised and unrealised, side by side
| Realised | Unrealised | |
|---|---|---|
| When it arises | The bill or invoice is paid or the currency is converted | An open balance is revalued at a reporting date |
| What it measures | CAD at settlement minus CAD at recording | CAD at the closing rate minus CAD previously recorded |
| Does it reverse? | No, the cash has moved | It changes again at the next revaluation, until settled |
| Typical balances | Paid supplier bills, collected invoices, conversions | Unpaid bills, unpaid invoices, foreign cash balances, foreign loans |
Worked example: one supplier bill, two months
Example only, with made-up rates. An Ottawa software firm receives a ₦2,400,000 invoice from a Lagos QA contractor on 10 November and pays it on 15 January. Its year end is 31 December.
| Date | Event | Rate (example) | CAD value | Difference |
|---|---|---|---|---|
| 10 Nov | Bill recorded | ₦1,200 = C$1 | C$2,000.00 | |
| 31 Dec | Year-end revaluation | ₦1,250 = C$1 | C$1,920.00 | C$80.00 unrealised gain |
| 15 Jan | Bill paid | ₦1,180 = C$1 | C$2,033.90 | C$113.90 realised loss against the revalued C$1,920.00 |
Check: 2,400,000 ÷ 1,200 = 2,000.00; ÷ 1,250 = 1,920.00; ÷ 1,180 = 2,033.90. The liability fell in CAD at year end because the naira weakened, a C$80.00 gain. In January the naira had strengthened, so paying cost more CAD than the revalued figure, a C$113.90 loss. Across both years the net is a C$33.90 loss, exactly the difference between C$2,033.90 paid and C$2,000.00 first recorded.
How to record it cleanly
- Open one account for exchange gains and losses, or two (realised and unrealised) if your accountant prefers to see them apart.
- Record each foreign-currency bill, invoice and balance in its own currency, with the rate on the transaction.
- At each reporting date, revalue open foreign balances at the closing rate your policy names and post the difference as unrealised.
- On settlement, post the difference between the payment and the carried value as realised.
- Keep the rate evidence for every step: the source, the date and, for conversions, the confirmation showing rate and fee.
Accounting software with multicurrency does steps 3 and 4 for you once the rates are right; see setting up QuickBooks Online multicurrency with naira. Mistyped rates are the commonest cause of odd results, so glance at the gain or loss account every month.
Transfer fees are not exchange losses
When you buy naira, the cost includes any transfer fee and the margin between the rate you get and the mid-market rate. A transfer fee shown on its own line is a bank charge and is better recorded as one. The margin is built into the rate, so it shows up inside the exchange difference unless you separate it. Keeping fees and FX apart makes it far easier to see whether the currency moved against you or the conversion was simply expensive.
Reading the numbers
A run of realised losses on naira bills is not always a sign of a weak naira. If you buy naira in small amounts each time a bill falls due, each conversion carries its own margin and fee, and the losses add up even in a calm month. Batching payments or holding a naira balance changes the pattern. A large unrealised figure at year end, by contrast, usually reflects a big open balance, such as an unpaid intercompany bill to a Nigerian affiliate, and will move again before it is paid.
The tax side
For tax, how an exchange gain or loss is treated depends on whether it arises on income account (ordinary trading, such as paying a supplier) or capital account (for example, a loan used to buy a capital asset), and on whether it is realised. Those rules sit in the Income Tax Act and CRA guidance, and the answer for your business is a question for your accountant. This article is information, not tax advice.
Where Pryme fits
Holding naira in a naira balance and dollars in a dollar balance cuts the number of conversions, and so the number of exchange differences to explain. A Pryme Business Account keeps NGN, USD, GBP and EUR side by side, and Swap shows the rate first and the fee on its own line before you approve, so fee and FX are already separated in your records. For the Nigeria-side view of revaluation, see foreign currency accounting: revaluation and realised gains.
Questions people ask
What is the difference between a realised and unrealised FX gain?
A realised gain or loss arises when a foreign-currency amount is actually paid or converted. An unrealised one arises when an open balance is revalued at a reporting date and can change again before settlement.
Why does my naira supplier bill show a loss when I paid the exact invoice amount?
Because the CAD cost of the naira changed between the day you recorded the bill and the day you paid. The naira amount was right; the CAD value moved.
Should transfer fees go into the FX loss account?
A fee shown separately is better recorded as a bank charge. Keeping it apart from exchange differences shows whether the rate or the cost of converting caused the loss.
Are FX gains taxable in Canada?
It depends on whether they arise on income or capital account and whether they are realised. Ask your accountant; this article is not tax advice.
Sources
- CRA: Functional currency (modified 14 Sep 2026) · accessed Oct 2026
- Bank of Canada: Daily exchange rates (table dated 23 Oct 2026) · accessed Oct 2026
- IFRS Foundation: IAS 21 The Effects of Changes in Foreign Exchange Rates (overview page) · 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.