Exchange Gain/Loss
Profit/loss from currency exchange rate changes.
Formula
Exchange Gain/Loss = (Invoice Value × Rate at Settlement) − (Invoice Value × Rate at Invoice Date)
Real World
When the pound weakened sharply after the 2016 Brexit vote, UK importers like Primark faced higher costs buying dollar-priced goods, squeezing profit margins immediately.
Exam Focus
State clearly whether the pound is strengthening or weakening and who gains/loses — exporters and importers are affected in opposite directions.
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