Closing rate

Why does it matter in a group?

Every foreign subsidiary’s assets and liabilities are translated at the closing rate, so the group balance sheet shows them at what they are worth in the group’s currency on the last day.¹ Income and expenses use the average rateAverage rateThe exchange rate for a period, usually the month, used to translate a foreign subsidiary's income and expenses into the group's presentation currency.Open the glossary entry. The gap between the two lands in the translation reserveTranslation reserveThe part of group equity that holds exchange differences from translating a foreign subsidiary into the group's currency.Open the glossary entry. Use one closing rate per currency for the whole group. Two rates for one currency is the commonest cause of a difference in an intercompany reconciliationIntercompany reconciliationComparing what each group company records with its counterparties and explaining every difference.Open the glossary entry. Name the source of the rate, for example a central bank, in the close calendar, so that nobody picks a rate by hand.

A small example

Palmridge ends September 2026 with net assets of AED 13,905,000. At the closing rate of 0.2040, the group shows them at GBP 2,836,620.