Foreign Currency Gain/Loss GL Accounts

To post Realised and Unrealised Gains or Losses arising from exchange rate fluctuations on foreign currency transactions, you must configure the default gain/loss GL accounts in Infusion

If you are an existing user and have enabled Foreign Exchange, please create GL accounts for Realised Gain/Loss and Unrealised Gain/Loss, then update these accounts in Financial Settings > Default GL Accounts.'

Posting of Unrealised Gain and Loss 

Infusion uses a periodic inventory approach, where purchases are recorded to the Purchases account and inventory values are updated through period-end stock adjustments rather than continuously throughout the purchasing process.

As a result, any Unrealised gain or loss arising from exchange rate fluctuations between the receipt date and invoice date is recognised when the Supplier Invoice is posted.

If the Supplier Invoice is  posted using a different exchange rate from the receipt, any difference caused by the exchange rate movement will be recognised as an Unrealised foreign exchange gain or loss. 

The posting to the Unrealised Gain/Loss GL Account occurs when the Supplier Invoice is posted, as illustrated below:

The Purchases GL Account is posted when the receipt is processed.

The Supplier Control Account is posted using the invoice value.

Any difference arising from the exchange rate movement between receipt and invoice is posted to the Unrealised Gain/Loss GL Account.

 

Posting of Realised Gain and Loss 

When payments are made against the foreign currency invoice, any exchange rate difference between the Invoice exchange rate and the Payment exchange rate will be recognised as a realised foreign exchange gain or loss. 

The posting to the Realised Gain/Loss GL Account occurs when the payment is processed. During payment:

• The Supplier Control Account is reversed for the amount being settled.
• The Bank Account is credited with the actual amount paid.
• Any previously recognised Unrealised Gain/Loss relating to the portion of the invoice being paid is reversed and transferred to the Realised Gain/Loss GL Account.
• Any additional exchange rate difference arising between the invoice date and the payment date is also posted to the Realised Gain/Loss GL Account.

This ensures that foreign exchange gains and losses are recognised accurately as the liability is settled.

When a foreign currency supplier invoice is only partially paid, any previously recognised unrealised foreign exchange gain or loss will now be transferred to the Realised Gain/Loss GL account in proportion to the amount of the invoice that has been settled.

This ensures that:

• Only the portion of the unrealised gain or loss relating to the amount paid is realised.
• The remaining unrealised gain or loss stays associated with the outstanding invoice balance until further payments are made.
• Any additional exchange rate differences arising between the invoice date and payment date will continue to be recognised separately as realised foreign exchange gains or losses.