Exchange Gain/Loss
Profit/loss from currency exchange rate changes.
Formula
Exchange Gain/Loss = (Invoice Value × New Rate) − (Invoice Value × Original Rate)
Real World
When the pound fell sharply after the Brexit referendum in 2016, UK exporter Burberry saw the value of its overseas dollar-denominated revenues rise significantly when converted back to sterling.
Exam Focus
Always state the direction of the exchange rate change AND who benefits — exporters gain when the domestic currency weakens; importers lose.
How well did you know this?