What is Spot, historical and average exchange rates?
In short
The spot rate is the exchange rate for immediate delivery of a currency. Foreign currency transactions are recorded at the spot rate on the transaction date; the current rate is the spot rate at the balance sheet date.
Key takeaways
- Historical rates are the spot rates when particular transactions or balances arose.
- A weighted-average rate can be used for income items that occur evenly during the period.
- Forward rates are for delivery at a future date and are used in forward contracts.
Where it's tested
BAR: Foreign Currency Translation — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A US company sells goods to a German customer for €100,000 when the exchange rate is $1.10 per euro. At year-end, before payment, the rate is $1.15. What is reported at year-end?