Foreign currency and exchange rate risks

Carrying out business transactions in a foreign currency will have an effect on your normal accountancy procedures since you'll need to convert foreign currency payments and deposits into sterling.

Accounting procedures are complex and you should take professional advice on your own circumstances. Generally speaking when you account for foreign currency transactions you should calculate the amount in sterling, using the exchange rate that applied on the day of the transaction.

Any foreign currency held, as well as any amounts of currency that you owe or are owed, should be converted into sterling using the rate in force on the date of the balance sheet.

If you make any gains or losses as a result of foreign currency transactions, you should include these in your profit and loss account.

Bear in mind that holding assets in a foreign currency will have an impact on your balance sheet since - owing to exchange rate movements - their value might differ radically from one year to the next.