HOME / BLOG / HONG KONG

Multi-Currency Bookkeeping for a Hong Kong Company: Exchange Rates, Gains and Losses

By Di Ma, Project Manager 26 OCT 2026 · 6 MIN READ

Plenty of Hong Kong companies hold more than Hong Kong dollars: a USD account for overseas customers, an SGD or EUR balance on Airwallex, a supplier paid in RMB. Every one of those transactions has to end up in a single set of books, in a single currency — and the gap between the rate on the day you book something and the rate on the day the money actually moves is where the confusion starts.

Here is how it works under HKAS 21, the Hong Kong accounting standard on foreign exchange (the local equivalent of IAS 21), with worked examples.

One functional currency

Every company keeps its books in its functional currency: in the standard's words, "the currency of the primary economic environment in which the entity operates" (HKAS 21, paragraph 8). For most Hong Kong companies that is the Hong Kong dollar. A company whose sales, costs and financing are mainly in US dollars may find its functional currency is the US dollar instead; it is a question of fact, not choice.

Everything else is a foreign currency. The financial statements can then be presented in any currency (paragraph 38) — but the profits tax return is completed in Hong Kong dollars, so amounts in statements kept in another currency are converted for the return.

Booking a foreign-currency transaction

A transaction in a foreign currency is recorded at the spot exchange rate on the date of the transaction (paragraph 21). For practical reasons a rate that approximates it is often used — for example an average rate for a week or a month — but not if rates fluctuate significantly (paragraph 22).

Two practical rules follow:

• Use one documented source. A daily reference rate from a recognised source, applied consistently, is easy for an auditor to check. Rates picked from different websites on different days are not.
• Use the rate for the transaction's own date. A bank line from August booked in October must use August's rate, not October's.

The Hong Kong dollar is linked to the US dollar within a band of HK$7.75–7.85 (Hong Kong Monetary Authority), so USD amounts move little in HKD terms. Euros, sterling, yen or baht can move several percent in a month — that is where the gains and losses come from.

When the money moves: realised gains and losses

Suppose you invoice a US customer USD 10,000 on 1 August, when one US dollar is HK$7.84. The sale and the amount owed to you are booked at HK$78,400. The customer pays on 15 September, when the rate is 7.80, and HK$78,000 lands in your account. The receivable you are clearing was HK$78,400, so HK$400 is an exchange loss — not a discount, and not a reduction of the sale. HKAS 21 sends it to profit or loss in the period it arises (paragraph 28).

The same applies in reverse to supplier bills, and to any actual conversion: when your bank converts money for you, its deal rate is what actually happened, and the difference against the rate the balance was carried at is a realised gain or loss.

At the month or year end: unrealised gains and losses

At the end of each reporting period (paragraph 23):

• Monetary items — cash, bank balances, amounts receivable and payable, loans — are restated at the closing rate.
• Non-monetary items carried at cost — equipment, prepayments, inventory — stay at the rate on the date they were bought.

Example: a EUR account holds EUR 50,000, carried at 8.90 (HK$445,000). At the year end the euro is 9.10, so the balance is restated to HK$455,000 — an unrealised exchange gain of HK$10,000, also in profit or loss. Nothing was sold or converted; the books simply show the balance at what it is worth on the balance-sheet date.

Transfers between your own accounts

Moving USD 20,000 from your USD account to your HKD account is a conversion, not income. Both legs belong to one transaction: money out of one account, money into the other. The only thing that can be gained or lost is the exchange difference against the rate the USD was carried at. Booked as two unrelated lines, the receipt can end up as "sales" — a common and expensive mistake at tax time.

A word on tax

For profits tax, exchange differences are not all treated the same way: broadly, differences on trading items tend to follow the trading profit, while differences on capital items, or unrealised differences on some balances, can be treated differently. The point for the books is to keep exchange gains and losses on their own accounts, clearly labelled realised or unrealised, so the tax computation can separate them. The answer for your company depends on the facts — that is a question for your tax adviser.

The mistakes that put the numbers out

• Today's rate for old transactions. Importing three months of statements at today's rate misstates every line that came before.
• Mixing rate sources. One rate from the bank, another from a website, a third from a spreadsheet — impossible to reconcile and hard to audit.
• Bank fees booked as exchange differences. A conversion fee is a bank charge. Keep it separate from the rate movement.
• No year-end revaluation. Foreign-currency balances left at old rates make the balance sheet wrong, and your auditor will adjust it for you.
• Own transfers counted as income. See above.
• Exchange differences left in suspense. A difference nobody explains is a difference nobody can audit.

How Certanta handles it

Certanta keeps each client's books in its own functional currency, set per entity, with the rate and its source recorded on every line:

• 35 major currencies across bank accounts, bills and invoices — HKD, USD, EUR, GBP, JPY, CNY, AUD, SGD, TWD, MOP and more.
• The rate for the transaction's own date. For most currencies that is the European Central Bank's daily reference rate. Where the ECB publishes none, it is the issuing country's own daily rate: the Central Bank of the Republic of China (Taiwan) for TWD, Vietcombank for VND, the Bank of Russia for RUB, and the official pegs for MOP, AED and SAR. Every stored rate says where it came from.
• The bank's own rate on real conversions, taken from the statement — what actually happened, not a reference rate.
• Transfers between your own accounts matched leg to leg, so they are never counted as income.
• Exchange differences recorded as they happen — when a foreign-currency invoice or bill is settled, and on currency conversions — and prepared for your bookkeeper to sign off.
• Year-end revaluation where the accounts call for it: a closing-rate revaluation of foreign-currency balances can be posted as a year-end adjustment, with the unrealised difference on its own account.

Unlimited currencies and automatic exchange rates are included in every plan — see pricing. For more on the reports built from these numbers, see the 13-week cash flow forecast and the monthly management pack.

Frequently asked questions

This article is general information about foreign-currency bookkeeping under HKAS 21 (the Hong Kong equivalent of IAS 21), not accounting or tax advice for your company. The tax treatment of exchange differences depends on the facts; ask your tax adviser.