CFM64330 - Accounts drawn up in a foreign currency: rates used for translation: the basic rule

CTA10/S11

The basic rule

CTA10/S11 sets out the basic rule to be applied where the profits and losses of a company in a non-sterling currency are to be translated into sterling.

This is the case in particular where:

  • A company has a non-sterling presentation currency and a different non-sterling functional or designated currency - S7(2), see CFM64120.
  • A company has a non-sterling presentation currency and the same non-sterling functional or designated currency - S8(2) see CFM64130.
  • A non-resident company has a non-sterling statement of accounts - S9(2), see CFM64140.

The translation must be made either at:

  • The average rate for the accounting period;
  • In the case of a single transaction, an appropriate spot exchange rate for the transaction; or
  • In the case of an amount relating to more than one transaction, a rate of exchange derived on a just and reasonable basis from spot rates.

In most cases an average rate will be appropriate.

Carry back and carry forward of losses

The basic rule does not apply in relation to the carry back or carry forward of tax losses.

  • Further details on how to translate carry back losses into sterling are at CFM64350 to CFM64370.
  • Further details on how to translate carry forward losses into sterling are at CFM64380 to CFM64400.

There are also special rules to deal with the situation when a company has losses that originated in one currency but are offset against profits in an accounting period where those profits are computed in a different currency. CFM64420 has further details.

Similarly, there are special rules to deal with the situation when a company has losses that originated in sterling but are offset against profits in an accounting period where those profits are computed in a non-sterling currency (FA93/S92DC and S92DD). CFM64410 has further details.

Further guidance:

See CFM64110 for the meaning of functional and presentation currency.

See CTA64500+ for the meaning of designated currency.