What it means
Wise holds balances in several currencies, and each one becomes its own cash account: Cash – Wise EUR, Cash – Wise GBP and so on. The account tracks the balance in its own currency, and the books also carry what it's worth in dollars, since a US company reports in dollars.
When the €10,000 balance came in at $1.08 per euro, it went on the books at $10,800. By month end the rate is $1.10, so the same euros are worth $11,000. The $200 increase is an unrealized foreign exchange gain, and under US GAAP it goes through the P&L. If the rate had fallen, it would be a loss.
Spending from the balance works at that day's rate. Pay a €2,000 invoice and the expense is the dollar value that day. Any difference from the rate the euros were carried at is a realized gain or loss. Converting between two Wise balances is a transfer plus any FX difference, and Wise's conversion fee is booked as a fee.
First tie each balance, in its own currency, to Wise's statement for that currency. Then remeasure each one to dollars at the month-end rate and book the change as an FX gain or loss. Note the rate and its source so the figure can be checked later.
The gains and losses show up on the income statement. Mastercard covers paying abroad on a card, and PayPal handles its own currency conversions.
Why it matters. A balance in euros is worth a different number of dollars every month. Under US GAAP that change is a gain or loss on the P&L, and it has to be booked.
Wise isn't a ledger, and we don't connect to it. We work only in QuickBooks Online and Xero. This page covers how Wise shows up in the books kept there.
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Gain or loss = Foreign balance × Month-end rate − Foreign balance × Booked rateIn the foreign currency.
Unrealized FX gain
$200.00
How it’s worked out
- 1Booked value10,000.00 × 1.08$10,800.00
- 2Value at month end10,000.00 × 1.1$11,000.00
- 3Remeasurement$11,000.00 − $10,800.00$200.00
The gain or loss goes to the P&L in the month the rate moves. Conversion fees are booked separately as fees.
The entry, worked
A €10,000 balance is on the books at $1.08 per euro, or $10,800. At month end the rate is $1.10, so it's worth $11,000.
| Account | Debit | Credit |
|---|---|---|
| Cash – Wise EUR | $200.00 | |
| Foreign exchange gain | $200.00 | |
| Total | $200.00 | $200.00 |
The euro balance now shows its dollar value at the month-end rate, and the $200 increase is an unrealized gain in the P&L.
Common questions
How do I record foreign exchange gains and losses?
At each month end, restate every foreign currency balance in dollars at that day's rate. Book the change to an FX gain or loss account on the income statement.
Do I need a separate account for each Wise currency?
Yes. Track each balance in its own currency so it ties to Wise's statement for that currency and can be remeasured correctly.
Which exchange rate do I use at month end?
The spot rate at the balance sheet date, from one source you name in your policy and use every month. Transactions during the month are booked at the rate on the day they happen; an average rate for the month is a common shortcut when rates don't move much.
Read further
General information for US companies, not tax, legal or accounting advice. Check the specifics with a CPA before you act on them.