Which exchange rate is used for financial reporting on balance sheets?

The exchange rate used for financial reporting on balance sheets is the end of month rate. This rate reflects the currency values at a specific point in time, providing a snapshot of the financial position at the end of an accounting period. Using the end of month rate ensures that assets and liabilities are reported at their fair value as of the reporting date, which is essential for accurate financial reporting and analysis.

This approach helps to mitigate fluctuations that might occur throughout the month due to varying exchange rates, providing a more stable basis for reporting. It is particularly relevant for companies with international operations, where exchange rate variations can significantly impact the balance sheet figures presented to stakeholders. By adhering to this standard, organizations enhance the clarity and reliability of their financial statements.