How to Handle Unrealized Currency Gain/Loss in Odoo 16 Accounting
1In #Odoo, "unrealized currency" refers to the potential gain or loss that arises from changes in the exchange rate between two currencies before a transaction is settled or realized.
Video Chapters
00:00 - What is Unrealized Currency Gain/loss
00:49 - How to Configure Currency
01:44 - How to Configure Automatic Currency Rate
04:20 - How to Handle Unrealized Currency Gain/loss
It represents the difference in value between the initial recording of a transaction in one currency and the actual value of that transaction when converted to the base currency or another reporting currency.
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For example, let's say you have a sales invoice in Odoo that was originally recorded in a foreign currency, such as USD (United States Dollar), but your base currency is EUR (Euro). If the exchange rate between EUR and USD fluctuates between the invoice creation and the payment receipt, there will be an unrealized currency gain or loss.
If the exchange rate has moved in your favor, resulting in a higher value of the foreign currency when converted to your base currency, you will have an unrealized currency gain. Conversely, if the exchange rate has moved against you, resulting in a lower value of the foreign currency when converted to your base currency, you will have an unrealized currency loss.
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Odoo handles unrealized currency gains and losses by automatically calculating and recording them based on exchange rate fluctuations. These gains and losses are typically accounted for in specific accounts, such as "Unrealized Currency Gain" or "Unrealized Currency Loss," within your chart of accounts.
It's important to note that unrealized currency gains and losses are not realized until the transaction is settled or realized, such as when the payment is received or made. At that point, the unrealized gain or loss becomes a realized gain or loss and is reflected in your financial statements.
Managing unrealized currency gains and losses is essential for accurate financial reporting and provides visibility into the impact of exchange rate fluctuations on your business's financial position.
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