Help Center / General Ledger

How Light Handles FX

This page is a short overview of how Light handles foreign currency. Each section links to a detailed article.

Three currencies on every line

Every ledger line in Light stores its amount in up to three currencies:

  • Transaction currency: the currency on the invoice or bill, for example USD
  • Local currency: the currency your entity keeps its books in, for example GBP
  • Group currency: the currency your group reports in, for example EUR

Light converts each line when it posts, using the rate for the posting date. This means you can run reports in local or group currency at any time during the month.

Where rates come from

Light uses the daily reference rates from the European Central Bank (ECB). For currencies the ECB does not publish, it uses ExchangeRate-API. You can also set your own rates for your company or for a single entity. See When Custom Rates Apply vs System Rates.

When an invoice or bill is paid

Light compares the invoice or bill at its original rate with the payment at the payment-date rate. It posts the difference to the FX gain or FX loss account. This is the realised gain or loss. See Clearing, FX gain/loss, and CTA.

At month-end

When you run the FX revaluation task as part of closing the month, Light does two things:

  • It values open foreign-currency balances, such as unpaid invoices and bills and foreign-currency bank accounts, at the month-end rate. It posts the difference to the unrealised FX gain/loss account. This is the unrealised gain or loss.
  • It translates each entity's balance sheet into the group currency at the month-end rate. Equity stays at the rate it was recorded at, and the difference is posted to the currency translation adjustment (CTA) account in equity.

See FX revaluations.

Example

Your UK entity, which keeps its books in GBP, receives a bill for $10,000.

Date Rate GBP value What Light posts
15 Jan: bill posted $1.25 = £1 £8,000 The bill, at £8,000
31 Jan: month-end revaluation $1.20 = £1 £8,333 Unrealised FX loss of £333
10 Feb: bill paid $1.22 = £1 £8,197 The payment, and a realised FX loss of £197
28 Feb: month-end revaluation Reversal of January's £333 unrealised loss

Across the two months, the total loss is £197. This is the difference between the value of the bill when it was booked and the amount you paid.

Between 10 and 28 February the bill is fully paid, but January's £333 is still on the accounts payable account. It comes off when you run the revaluation for February. See Why a paid invoice can still show a balance.

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