Realized FX gain or loss vs unrealized FX gain or loss
Each, defined
Realized FX gain or loss
Realized FX gain or loss — The exchange difference crystallized when a foreign-currency item is settled — settlement-date rate versus the rate it was last carried at.
Unrealized FX gain or loss
Unrealized FX gain or loss — The exchange difference on an open foreign-currency monetary item at period end, recognized in the P&L and reversed or carried forward until settlement.
Side by side
| Realized FX gain or loss | Unrealized FX gain or loss | |
|---|---|---|
| Item status | Settled | Still open |
| Measured at | Settlement date | Each balance-sheet date |
| Locked in | Yes — cash has moved | No — it can reverse |
| Goes to | P&L | P&L (remeasurement) |
One receivable, both kinds of gain and loss
A 20,000 EUR receivable booked at 1.0850 is remeasured at 1.0990 at month-end — an unrealized $280 — and collected next month at 1.0720, realizing ($540) against the remeasured value.
| Event | Rate | USD value | Gain or loss |
|---|---|---|---|
| Invoice booked | 1.0850 | 21,700.00 | — |
| Month-end remeasurement | 1.0990 | 21,980.00 | 280.00 |
| Collected | 1.0720 | 21,440.00 | (540.00) |
How they relate
An open foreign-currency receivable or payable is remeasured at every balance-sheet date, and the change is an unrealized gain or loss. When it settles, the difference from the last remeasured value is realized.
Over the item's life the two add up to the total difference between the booking rate and the settlement rate. The split only says how much of it was locked in.
Questions
- Do unrealized FX gains hit the P&L?
- Yes, under ASC 830 for monetary items in a foreign currency. The exception is translation of a foreign subsidiary's statements, which goes to other comprehensive income.
- Which balances create them?
- Monetary items — cash, receivables, payables and debt in a foreign currency.
See it computed
Worked through: the calculators, the journal entries and the tools that use these terms.
- Journal entry for a realized foreign exchange gain or lossBook a foreign-currency invoice at the rate on the invoice date. When it is collected at a different rate, debit Cash for the dollars received, credit Accounts receivable for the dollars originally booked, and book the difference as a realized foreign exchange gain or loss.Entry
- Journal entry for an unrealized FX revaluationAt each month-end, remeasure open foreign-currency receivables and payables at the closing rate: debit the receivable and credit Foreign exchange gain when the dollar value has risen, or the reverse for a loss. The gain is unrealized until the item settles.Entry
- FX conversion & gain/lossThe rate is the one in your policy, so you type it. No live rate, no network call, no stale surprise.Tool
Definitions are the glossary’s, generated from the same documents. Figures in the examples are computed by tested functions, not typed. General information for US companies under US GAAP, not accounting or tax advice.