Operating a global SaaS or cross-border B2B business requires billing customers in local currencies while maintaining core ledger accounting in a base functional currency (e.g. USD, EUR, or GBP). Fluctuations in exchange rates between invoice issuance and payment settlement create foreign exchange (FX) gains or losses that must be calculated and booked accurately.
1. Realized vs Unrealized FX Accounting
| FX Concept | Accounting Definition | Journal Entry Impact |
|---|---|---|
| Unrealized FX Gain/Loss | Calculated at period-end for unpaid open invoices based on current spot rates vs booking rates. | Balance Sheet revaluation reserve; temporary P&L adjustment. |
| Realized FX Gain/Loss | Calculated upon final cash settlement based on bank exchange rate vs invoice issuance rate. | Permanent Operating Expense / Income P&L line item. |
