Which exchange rate type should be used for Income Statement Accounts?

Using the End of Month exchange rate type for Income Statement Accounts is appropriate because it reflects the exact exchange rate at the conclusion of a specific accounting period. This approach captures the currency fluctuations that may have occurred throughout the month, providing a more accurate representation of revenue and expenses as they relate to income statements.

Income statement accounts are typically reported based on the rates effective at the time of reporting for the entire period, thereby allowing financial statements to show the true economic impact of transactions that occurred within that timeframe. This method ensures that any income or expense recognized is measured at the most relevant exchange rate based on when the income was earned or the expense was incurred.

Utilizing other exchange rate types, such as the average exchange rate, would not account for significant fluctuations during the month and may distort financial results. Meanwhile, multiplying or dividing source values by exchange rates may complicate the proper alignment of income statement reporting with the recognized revenues and expenses according to the corresponding period's exchange rate.