Year-end in foreign currencies: translation differences, FX loss provisions and the global currency position under French GAAP

A dollar invoice is recorded at the rate of the day it is booked. When it is still open at year-end, the rate has moved: the euro amount on the balance sheet is no longer right. The French chart of accounts (PCG) says exactly what to do with that difference — and the treatment is deliberately asymmetric.

The rule: everything is remeasured at the closing rate

Receivables and payables in foreign currencies are translated at the latest exchange rate. When that rate changes the amounts already booked, the difference is recorded in transitional accounts, pending settlement (PCG, Article 420-5):

A worked example

A company closes its books on 31 December. It has a customer receivable of USD 100,000, booked at a rate of 1.10, and a supplier payable of USD 50,000, booked at 1.12. The closing rate is 1.16.

Without anything else, the company books a provision of EUR 4,702.19 and leaves the EUR 1,539.41 gain on the liability side of the balance sheet. Three situations allow this provision to be reduced.

The three cases where the provision is reduced

1. 1
   The receivable or payable is hedged

   If the foreign-currency transaction is matched by an FX hedge, the provision only covers the unhedged risk (Article 420-6, 1°). Differences offset by the hedge have their own sub-accounts: 4768 and 4778 "differences offset by FX hedging".

2. 2
   The transaction is itself a hedging instrument

   A foreign-currency transaction qualified as a hedging instrument gives rise to no provision on its unrealised loss (Article 420-6, 2°) — for example, a dollar loan that hedges dollar revenue.

3. 3
   Losses and gains form a global currency position

   For transactions with sufficiently close maturities, the charge can be limited to the excess of losses over gains (Article 420-6, 3°).

The global position is strictly framed. It must be:

• determined currency by currency;
• built excluding hedging transactions and hedged items;
• limited to items maturing in the same financial year;
• made up of realisable items: receivables, payables, derivatives;
• used only to calculate the provision.

Cash in foreign currencies: straight to profit

Bank accounts and cash in foreign currencies follow a different rule. They are translated at the latest spot rate, and the difference goes straight to profit for the year, gains included — unless they form part of a hedging relationship (Article 420-7). No transitional account, no provision: a dollar balance that appreciates at year-end produces a recognised gain.

Where realised differences go

Since financial years beginning on 1 January 2017 and ANC Regulation 2015-05, the chart of accounts distinguishes the origin of the difference:

Tax treatment: everything counts, unrealised gains included

Tax does not follow accounting prudence. Under Article 38-4 of the French General Tax Code, translation differences on foreign-currency receivables and payables are determined at year-end on the basis of the latest exchange rate and taken into account in taxable profit for the year — unrealised gains included.

As a corollary, the FX loss provision is not deductible, since the unrealised loss already is through the translation difference. In practice, on the tax return, the translation difference is adjusted off the books and the provision charge is added back.

Year-end checklist

1. List all foreign-currency receivables and payables open on the closing date, with their booking rate.
2. Take the closing rate for the closing date, with its source.
3. Calculate each line's difference and record it in 476 or 477.
4. Identify the hedged portion of each item and record it in 4768 / 4778.
5. Decide whether or not to apply a global currency position, currency by currency and by year of maturity — and stick to it from one year to the next.
6. Book the provision for the unhedged unrealised loss only.
7. Remeasure foreign-currency cash straight through profit.
8. Prepare the tax adjustments: translation difference and add-back of the provision.

Sources

• French Accounting Standards Authority (ANC), Regulation No. 2014-03 on the French chart of accounts (PCG), consolidated version as of 1 January 2026: Articles 322-6, 420-5, 420-6, 420-7 and 420-8; account nomenclature 1515, 476, 4768, 477, 4778, 656, 756, 666 and 766.
• ANC Regulation No. 2015-05 of 2 July 2015 on forward financial instruments and hedging transactions, applicable to financial years beginning on or after 1 January 2017.
• BOFiP (French official tax guidance), BOI-BIC-BASE-20-20 (measurement of foreign-currency receivables and payables, Article 38-4 of the General Tax Code) and BOI-BIC-PROV-30-10-30 (non-deductibility of FX loss provisions).