Example: Unrealized Gain/Loss on a Foreign Currency Invoice

In this example, a French company calculates an unrealized gain/loss on an open foreign currency invoice in U.S. dollars (USD).

Because of the exchange rate risk, the potential exists for an unrealized gain or loss at the end of the fiscal period when the open invoice (USD) is revalued against the euro (EUR).

Description	Currency	Amount	Exchange Rate January 1	Exchange Rate January 31
Invoice (domestic)	EUR	1,135.45	1 USD = 1.13545 EUR	not applicable
Invoice (foreign)	USD	1,000.00	not applicable	not applicable
Open invoice (domestic)	EUR	1,132.25	not applicable	1 USD = 1.13225 EUR
Unrealized gain/loss	EUR	–3.20	not applicable	not applicable

The foreign invoice on January 1 is 1,000.00 USD, or 1,135.45 EUR in the domestic currency.

1,000.00 USD Ã 1.13545 = 1,135.45 EUR

The foreign invoice remains open on January 31 and is revalued against the euro.

1,000.00 USD Ã 1.13225 = 1,132.25 EUR