Hi,
Client of mine has done some work in Asia where he has been paid in US dollars. Consequently he has a US dollar bank account with the income sitting in the account.
This money has been sitting in the account for many months which has now been subject to exchange rate fluctuations between sterling/dollars, but when do we account for this movement....ie: at the year end? Or only at the point when its transferred into sterling?
Any advice would be appreciated.
Matt
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You include foreign currency income in the £ Sterling accounts at the exchange rate prevailing at the time or, perhaps, a reasonable average for the period. At the accounting date, any outstanding balances denominated in a foreign currency should be converted to £ Sterling at the current rate, with the difference credited/charged to exchange gains/losses and subject to tax accordingly. Whenever you actually exchange foreign currency for £ Sterling, you will have a gain/loss against the £ Sterling book value.