FX Accounting Practices

How new FRS 102 rules put spotlight on currency exchange rate risk

As of 2016/2017 Accounting Rules for Reporting Forward Foreign Currency Contracts New Financial Reporting Standard (FRS) 102 rules have changed.

Gains or losses on these forward contracts now need to be stated on the year-end balance sheet as an asset or a liability. The value is calculated as the difference between the contracted forward rate and the forward rate at year-end.

Getting a better picture of how currency exchange rate risk affects your bottom line

As you’ll have to declare any currency gains or losses made, you’ll instantly see how movements in the currency market as well as your currency risk management processes affect your balance sheet.

More importantly, this will help you assess whether or not your risk management strategy is fit for purpose. You can then make the necessary changes to protect your business’s margins going forward.

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