Multi-currency conversion in consolidated financial statements

1. Choose your functional currency

The functional currency is usually that of the parent company or of the country where business decisions are made. Define a single reporting currency and convert everything to it.

2. Exchange rates: closing vs average

Balance sheets convert at the period-end closing rate, while income statements usually use the average rate for the year. Mixing both without a criterion distorts the analysis.

Document the rates used by month in a sheet so any auditor can reproduce the calculation.

3. Translation differences

The difference between converting items at different rates generates an equity adjustment that must appear as a separate line. Do not hide it inside the income statement.

4. Implementing it in Google Sheets

Use GOOGLEFINANCE for closing rates or a manual rates table. Reference every amount to the corresponding rate cell and centralize the month rate in a single editable place.