Exchange-rate selection

Exchange-rate selection assigns the right rate to each amount and date. A rate schedule should state the currency quotation, source, timestamp or period, and intended use. Without those facts, another reviewer cannot reproduce the number. The choice follows the accounting model; it does not follow whichever rate makes the worksheet balance.

For a foreign-currency transaction, use the transaction-date rate for initial recognition and a current rate for a monetary balance at a later balance-sheet date. For translation, ASC 830-30-45-3 assigns current rates to assets and liabilities and appropriate rates to revenues, expenses, gains, and losses. Historical equity amounts retain their applicable historical rates. An average rate may approximate actual transaction-date rates for a period only when the approximation is reasonable.

Suppose a foreign entity earns evenly throughout a month, but exchange rates move sharply on the final day. A supported monthly average may translate the month's revenue. The final-day closing rate translates an ending receivable. Applying the closing rate to both amounts confuses a flow with a balance.

Always test the quotation. If the table gives euros per dollar, dividing euros by that rate produces dollars. If it gives dollars per euro, multiplication produces dollars. Label every column with units and keep historical, average, transaction-date, settlement, and closing rates separate.