FX Revaluations

Foreign exchange (FX) revaluation adjusts your GL account balances to reflect current exchange rates. In Light, FX revaluation is a required step in the period-end close process and is run on a per-entity basis. This article also explains the wider currency framework it sits in — how Light stores currencies, sources rates, and translates balances for consolidation.

# How Light handles foreign currency

Light maintains a three-tier currency model on every ledger transaction line:

Every posted line stores its amount in all three currencies at the same time — local and group are always populated, transaction currency where applicable — together with the debit/credit sign. This means the functional-currency and group-currency view of each transaction is fixed and auditable at the moment it posts.

# Understanding FX Revaluation

FX revaluation addresses the mismatch between when a transaction is recorded and when it settles.

Example:

• You invoice an AR customer for 100,000 EUR on January 1 at a rate of 1.20 USD/EUR = 120,000 USD
• You post 120,000 USD to your receivable in the GL
• By January 31 (period-end), the rate has moved to 1.18 USD/EUR
• The receivable is now worth 118,000 USD at the new rate
• Unrealized loss: 120,000 - 118,000 = 2,000 USD

FX revaluation entries record this unrealized gain or loss and adjust GL balances to reflect current exchange rates at period-end.

# Exchange Rate Sources and Governance

Light sources exchange rates from two providers:

• European Central Bank (ECB) — The primary source, providing daily reference rates that are ingested automatically.
• ExchangeRate-API — A commercial provider used for currencies not published by the ECB, ensuring coverage for less common currencies.

How rates are stored and resolved:

• EUR pivot. All rates are stored against EUR (currency → EUR). Cross-rates between two non-EUR currencies are derived arithmetically — for example, USD→GBP = USD→EUR ÷ GBP→EUR.
• Dual dates. Each rate is held with both its effective (market) date and the date it was ingested.
• Non-trading days. A request for a date with no published rate resolves to the most recent prior effective rate — for example, a Monday with no rate uses the preceding Friday.

# Rate overrides

You can override system rates instead of using market rates:

• Override scope and precedence. Overrides resolve in the order entity → company → system, and are available at daily or monthly granularity. Document-level rate overrides take the highest precedence — on an AP, AR, or JE document, open the FX Rates section and toggle Override Local Currency Rate or Override Group Currency Rate to set the entity or group conversion explicitly.
• No hybrid cross-rates. If only one leg of a required currency pair has an override, Light discards the override and falls back to system rates for both legs — a derived cross-rate is never built from mismatched sources. To be sure your custom rates apply everywhere, set a rate for every non-EUR currency you transact in, each month.

For setting your own rates, see Setting a Custom FX Rate for Your Company and When Custom Rates Apply vs System Rates.

# How Rates Are Applied by Account Type

Light assigns each ledger account an exchange-rate type derived automatically from the account's classification. This is the key control behind which balances move at period-end:

This implements the standard monetary / non-monetary distinction: monetary balance-sheet items are carried at the closing rate, while equity and income-statement items are held at the historical rate at which they were recognized. The difference that arises between closing-rate balance-sheet items and historical-rate equity/P&L is captured as the cumulative translation adjustment (see below).

Note on income and expenses: Light translates income and expenses at the actual transaction-date (spot) rate of each item, not at a period-average rate. Under IAS 21 this is the preferred basis — the standard requires the spot rate at the date of each transaction (IAS 21.21) and only permits a period-average rate as a practical approximation, which is inappropriate when rates fluctuate significantly (IAS 21.22; IAS 21.40 for translation to the presentation currency). Light applies the actual rate per item, so it is more precise than an average-rate method rather than a deviation from it; auditors expecting average-rate P&L translation should simply note the difference in approach.

# What gets revalued

A revaluation is defined by two things: which balances are revalued (the population) and which currency layer the difference lands in (the dimension). Light keeps these separate.

# Open items (AP / AR and accruals)

Open or partially-cleared payable and receivable documents, plus released accrual lines that are still open at period end. These are revalued per document or accrual line at the period-end closing rate, with a link back to the source invoice/line for traceability. Documents that were fully cleared during the period are also included in the run — this is how prior periods' unrealized revaluations on those documents are reversed once the gain or loss has become realized at clearing.

# Monetary accounts (bank, cash, etc.)

Balance-sheet accounts you set to revalue — bank, cash, and other monetary accounts. These are revalued per account and currency at the closing rate, based on the account's open foreign-currency balance.

# Local entity FX (functional-currency revaluation)

The transaction → local dimension. Light brings the open foreign-currency balance to the period-end closing rate in the entity's functional (local) currency and posts the offset to the unrealized FX gain/loss account. This is the gain or loss that appears in the entity's own books. It is controlled per account by the Entity revaluation settings dropdown described below.

# Group FX (presentation-currency translation → CTA)

The local → group dimension. Light re-translates the local-currency balance to the group (presentation) currency at the closing rate and posts the offset to the CTA account. On a CTA posting the local-currency amount is nil — by design it adjusts only the group-currency balance, because it represents the translation-only difference between functional and presentation currency. It is controlled per account by the Group revaluation settings dropdown; an account set to Historical generates no CTA.

# Setting FX behaviour per account

Each ledger account has an FX settings section with two dropdowns that control how the account behaves at period-end. Set them when creating or editing an account in Accounting → Chart of accounts:

To configure an account:

1. Go to Accounting → Chart of accounts (open Chart of accounts)
2. Click + Create account, or open an existing account and click Edit
3. In the FX settings section, set Entity revaluation settings and Group revaluation settings
4. Click Save

Typical settings by account type (these follow the account classification described above):

• Monetary assets & liabilities (AR, AP, bank, cash, intercompany): Entity revaluation settings = Revalue for entity, Group revaluation settings = End of period — revalued at the closing rate and translated to group with CTA.
• Equity: Do not revalue + Historical — held at the original rate, no CTA.
• Revenue & expense: Do not revalue + Historical — held at the transaction-date rate, no CTA.

# Transaction-Level Conversion (at posting)

When a document is posted, Light fetches the rates effective on the posting date and computes the amounts for every line:

• transaction currency → local currency, and
• local currency → group currency.

These amounts are persisted on the line, and the source of each rate (system, company override, entity override, or document override) is recorded — giving a complete audit trail of the rate applied to every posting.

# Realized FX (at settlement)

Realized FX gains and losses are recognized when an open foreign-currency item (such as an AP or AR invoice) is cleared or settled. Light computes the difference between:

• the item's value at the original posting-date rate, and
• its value at the clearing-date rate,

and posts the difference to the system FX gain / FX loss accounts — recognized in profit or loss per IAS 21.28. Where the local-to-group conversion also differs, the group-only component is posted to the CTA account. Sub-unit rounding differences arising from the three-currency conversion are isolated to a dedicated rounding account, so the double entry stays balanced in all three currencies.

Example:

• AR revalued: Owed 100,000 EUR, revalued to 118,000 USD at period-end
• Customer pays: Sends 100,000 EUR, bank converts at 1.19 = 119,000 USD
• You receive 119,000 USD in the bank
• The original invoice was recorded at 120,000 USD
• Realized loss: 120,000 - 119,000 = 1,000 USD

The total P&L impact across periods combines unrealized and realized gains/losses.

# Unrealized FX — Period-End Revaluation

Period-end revaluation is run as a controlled accounting-period close task — not an ad-hoc process. Each accounting period has a set of required tasks that must be completed before the period can be closed:

• Account Payables — Close AP for the period
• Account Receivables — Close AR for the period
• Journal Entries — Close journal entries for the period
• FX revaluation — Run and post FX revaluation entries

Controls and sequencing:

• The FX revaluation task can only run after the period's sub-ledger lock tasks (Account Payables, Account Receivables, Journal Entries) are completed.
• The prior period's revaluation must already be completed (or not exist) before the current period's revaluation can run — enforcing strict chronological sequencing and preventing gaps.

# What gets revalued

The run covers the open items and monetary accounts described under What gets revalued above — open AP/AR documents and accruals, plus any account whose Entity revaluation settings is Revalue for entity. Each open balance is taken at the period-end closing rate, and for any account whose Group revaluation settings is End of period the local→group difference is posted to CTA.

# How the adjustment is calculated

For each population, Light revalues the open foreign-currency balance at the period-end closing rate and compares it to the amount currently on the books:

Revalued balance = open balance (original currency) × period-end rate
FX adjustment    = Revalued balance − current carrying amount

# How it posts

• FX accounting documents are created per entity — one for each revaluation population with balances to adjust (Accounts Payable, Accounts Receivable, accruals, other revalued accounts, and CTA) — dated at period end and posted immediately; they are never left in draft.
• The monetary account is adjusted to its revalued amount; the offsetting entry is posted to the system unrealized FX gain/loss account, or to the CTA account for the local-to-group translation component.
• AP/AR and accrual revaluation lines carry a link back to their source document/line, supporting line-level traceability. Account-level revaluations (other monetary accounts and CTA) are posted per account and currency, without a document link.

Revaluation runs are idempotent (protected against duplicate posting) and can be archived or reversed through a controlled reversal that reverses the underlying accounting document. The full history of revaluation documents is retained.

# Running FX Revaluation

To run FX revaluation for a period:

1. Go to Accounting → Accounting periods in the sidebar (open Accounting periods)
2. Expand the relevant year and click on the period you want to close (e.g., May 2024)
3. On the Tasks page, find the FX revaluation row and click Run revaluations
4. The FX revaluation dialog opens with two sections:
   • Entities to close — A list of your entities (legal entities) with checkboxes and a Last run column showing when revaluation was last posted for each entity
   • Document revaluation — Shows any revaluations that have already been posted for this period
5. Select the entities you want to revalue by checking their checkboxes
6. Click Post revaluation

Light calculates the unrealized FX gains and losses for the selected entities and creates the corresponding accounting document automatically. You can view the resulting entries on the Journal entries page, linked to the accounting period in which the revaluation was run.

# Reviewing Posted Revaluations

After posting, the Document revaluation section of the FX revaluation dialog shows the revaluations that have been posted for the period. You can review these at any time by:

1. Going to Accounting → Accounting periods (open Accounting periods)
2. Clicking on the relevant period
3. Clicking Run revaluations on the FX revaluation task row

The Last run column in the entities list shows the date of the most recent revaluation for each entity.

# Reopening or Reversing a Revaluation

If an FX revaluation task has already been completed for a period, the action button changes from Run revaluations to Reopen. Reopening marks the task (and any dependent tasks) as no longer completed so you can re-run the revaluation if adjustments are needed — it does not by itself reverse the posted entries. To back out a posted revaluation, archive the individual FX revaluation document; archiving reverses the underlying accounting document through a controlled reversal. Because a re-run takes previously posted revaluations into account, it will not double-post, and the history of revaluation documents is retained for audit.

# Multi-Entity Revaluation

If you have multiple legal entities in Light, each entity is revalued independently. The FX revaluation dialog lists all your entities with checkboxes, so you can:

• Select all entities and revalue them at once
• Select individual entities to revalue them one at a time
• Track the Last run date for each entity to see which have been revalued

# CTA (Cumulative Translation Adjustment)

CTA captures the difference that arises because asset and liability accounts are re-translated to the closing rate each period (their Group revaluation settings is End of period), while equity and accumulated P&L stay at historical rates. The net imbalance posts to the system Currency Translation Adjustment account — recognized in other comprehensive income and accumulated in a separate component of equity (IAS 21.39(c) and 41) — and, as described under Group FX above, it adjusts only the group-currency balance (the local amount is nil).

CTA is generated in two places:

• Period-end revaluation — for accounts carried at the closing rate.
• Settlement — the group-only residual when a foreign-currency item clears (see Realized FX (at settlement) above).

# Consolidation (group level)

Consolidation is produced as a report-time computation, not as posted consolidation journals. Each entity's results are translated and aggregated into the group presentation currency and summed:

• Subtotal — the sum of the in-scope entities' results (in group currency)
• Eliminations — computed against a dedicated elimination ledger (intercompany lines flagged for elimination generate reversing entries into this ledger)
• Total — subtotal + eliminations

A consolidated report may be presented in local currency only if all in-scope entities share the same functional currency; otherwise it must be presented in the group base currency, which always works across mixed-currency entities. By default consolidation covers all entities in the group (or an explicitly selected set), summed on a flat basis. See Multi-currency consolidation for details.

# Summary of Standards Alignment

The Assessment is the same under both frameworks. Paragraph references are to IAS 21 The Effects of Changes in Foreign Exchange Rates and ASC 830 Foreign Currency Matters. Under ASC 830, the transaction-to-functional layer is a remeasurement (transaction gains/losses recognized in net income, ASC 830-20) and the functional-to-presentation layer is a translation (CTA reported in other comprehensive income, ASC 830-30). On the sale or substantially complete liquidation of a foreign entity, the accumulated CTA is reclassified from equity to net income (ASC 830-30-40-1, as clarified by ASU 2013-05).

Tax considerations: Some jurisdictions tax only realized FX gains/losses, and unrealized losses may not be deductible. Consult your tax advisor on the treatment of revaluation entries.

# Best Practices

• Revalue monthly — Don't wait until quarter-end; catching changes regularly produces more accurate interim results
• Close prerequisite tasks first — Make sure Account Payables, Account Receivables, and Journal Entries are closed before running FX revaluation
• Revalue all entities — Ensure every entity with foreign currency exposure is selected when posting revaluation
• Set account FX settings — On each balance-sheet account that holds foreign currency, set Entity revaluation settings to Revalue for entity and Group revaluation settings to End of period; keep equity and P&L accounts on Do not revalue / Historical
• Review before closing — Check the generated entries on the Journal entries page before closing the period
• Track the Last run date — Use the Last run column in the FX revaluation dialog to confirm all entities have been revalued for the current period
• Separate realized vs. unrealized — Track both types of FX gains/losses for accurate analysis and reporting
• Document your policy — Be consistent in how and when you run revaluation across periods

# Related Articles

• Clearing, FX gain/loss, and CTA
• Currency settings
• When Custom Rates Apply vs System Rates
• Multi-currency consolidation
• Multi-currency reconciliation
• Multi-entity ledger management