Month-End and Year-End Closing Exchange Rates: IAS 21 and ASC 830 in Practice
Which exchange rate to use for transactions, monetary balances and consolidation at period end under IAS 21 and ASC 830, which published source to standardise on, and how to make the close reproducible.
The close needs three kinds of exchange rate, and they come from the same published table used three ways. The standards are clear on which to use where. What goes wrong in practice is the source: a market feed with no publication date, a rate typed in from a website, a spreadsheet tab someone updated by hand. Auditors do not object to the rate; they object to not being able to reproduce it.
The three rates
| Item | IAS 21 | ASC 830 | Rate to use |
|---|---|---|---|
| Transactions during the period | Spot rate at the transaction date (para 21); average permitted as an approximation (para 22) | Rate at the transaction date; weighted average permitted | Published daily rate on the date, or an average computed from the published daily table |
| Monetary assets and liabilities at period end | Closing rate (para 23a) | Current rate at the balance sheet date | Published rate on the reporting date, or last published before it |
| Foreign operations on consolidation | Assets and liabilities at closing rate, income and expenses at transaction-date or average rates (para 39) | Current rate for balance sheet, average for income statement | Same two rates as above, from the same source, for every entity |
Choosing the source
Neither standard names a publisher. The group policy does. The usual choices are the ECB reference rate for euro groups, the Federal Reserve H.10 series for US-dollar groups, and the Bank of England spot series for sterling. Groups with subsidiaries in countries whose currency the head-office source does not quote need the local central bank's table for that leg, which is where a single source covering 116 central banks saves the close a day. Whatever the choice, write it into the accounting policy with the publisher, the table and the treatment of non-publication days, and do not change it without documenting why.
Making the close reproducible
- Pull, don't type. The closing rate should arrive in the consolidation system or the workbook from the published table with its date, not from a browser tab.
- Compute averages yourself. Pull the daily series for the period and average it in the workbook. A vendor's "monthly average" cannot be recomputed by an auditor.
- Keep the table, not just the number. Store the full published table for each reporting date. When a restatement or a question arrives two years later, the table is the evidence. Our history endpoints return any past table, but a copy in your own records is what the auditor will ask for first.
- One source for every entity. Subsidiaries closing with their own local feed produce intercompany differences that are not real. Publish the group table to them.
For the systems side, the SAP, Business Central and Odoo guides cover loading the closing table into the exchange rate type used for revaluation. Spreadsheet-based closes can pull the same table with a formula.
Frequently asked questions
Can we use an average rate for the month?
For income and expenses, yes, where the average is a reasonable approximation of the rates on the transaction dates, which both IAS 21 and ASC 830 allow. Not for monetary balances at period end, which must use the closing rate. Compute the average from the published daily table rather than taking a vendor's average, so it can be recomputed.
Which closing rate: bid, ask or mid?
The standards say the spot rate at the reporting date. Most groups use a published mid or reference rate consistently. What matters more than the choice is that the policy names the source and is applied every period.
What if the period end is a weekend?
Use the last published rate before the reporting date, and record that you did. An API lookup for the reporting date should return that rate and state the publication date it used, which is what ours does.
Which currencies and which consolidation tool?
Tell us the group's reporting currency, the subsidiaries' currencies and where the close happens, and we will propose the source table and the delivery.
Talk to us Central bank tables