# Average rate

> The exchange rate for a period, usually the month, used to translate a foreign subsidiary's income and expenses into the group's presentation currency.

Source: https://finconsol.com/blog/glossary/average-rate/ (updated 28 October 2026)

## Why does it matter in a group?

A group translates a foreign subsidiary's income and expenses at the rates on the dates of the transactions. That is impractical for every entry, so a rate for the period is used, often the average for the month, unless rates swing widely within it.[1](#src-1) The balance sheet is translated at the [closing rate](/blog/glossary/closing-rate/). The two rates differ, and the gap goes to the [translation reserve](/blog/glossary/translation-reserve/). One average rate per currency for the whole group keeps every company on the same number. If the rate moved sharply during the month, the rate on the date of a large transaction gives a better answer than the average.

## A small example

Palmridge earns AED 1,905,000 in September 2026. At the group's average rate of 0.2025, the profit in the group accounts is GBP 385,763.

## Sources

## Sources

1. IAS 21 [The Effects of Changes in Foreign Exchange Rates](https://www.ifrs.org/issued-standards/list-of-standards/ias-21-the-effects-of-changes-in-foreign-exchange-rates/), paragraphs 39 and 40.