MTT09100 - Miscellaneous pages: Currency conversions

Calculations must be carried out in the currency used to present the consolidated financial statements of the ultimate parent (the ‘CFS currency’, or generally known as the ‘presentational currency’).

A requirement to convert figures from one currency to another arises in the following scenarios:

  • an amount must be converted into the CFS currency.
  • an amount must be converted to assess whether a threshold in euros has been met.
  • a top-up amount that has been calculated in a non-sterling currency must be converted to sterling.

 This is set out in Section 254 of Finance (No.2) Act 2023.

Conversions to CFS currency

Where it is necessary to convert an amount into the CFS currency, the conversion must be made in accordance with the authorised accounting standard that was used to prepare the consolidated financial statements.

Where no such statements were prepared, the conversion must be made in accordance with the authorised accounting standards that would have been used, had such statements been prepared.

See MTT09520 for guidance on the consolidated financial statements.

Conversions to assess thresholds

A conversion from the CFS currency into euros is required where:

  • the CFS currency is not euros, and
  • an amount expressed in the CFS currency must be compared to a threshold expressed in euros.

The conversion must be made using the average exchange rate for the month of December preceding the accounting period to which the amount relates.

The exchange rates to be used are those published by the European Central Bank. Where the European Central Bank does not publish the relevant rates, the rates published by the Bank of England are to be used.

Where neither the European Central Bank nor the Bank of England publishes the relevant rates, a rate is to be used that appears, on a just and reasonable basis, to reflect the average exchange rate for the month. For example, the rates published by the central bank that issues the CFS currency may be used.

Conversions of top-up amounts to sterling

Where the CFS currency is not sterling, the top-up amount will be determined in that currency and must be converted to sterling.

This conversion is to be made using the average exchange rate for the accounting period.