> ## Documentation Index
> Fetch the complete documentation index at: https://docs.francis.app/llms.txt
> Use this file to discover all available pages before exploring further.

# Currency

> Convert actuals using market rates from the European Central Bank or custom rates.

Francis converts actuals from your accounting system's base currency into a target reporting currency. Use market rates from the European Central Bank (ECB) or enter your own. Both average and closing rates are supported.

## Set up currency

Go to **Settings > Integrations** and add a currency data source. You configure rates monthly.

<Tabs>
  <Tab title="Market rates">
    Francis sources market rates automatically from the European Central Bank.

    * **Monthly closing rates:** the rate the ECB published on the last business day of the month. This is the last trading day the ECB has data for, not necessarily the last calendar day.
    * **Monthly average rates:** the simple average of all daily rates the ECB published that month, calculated as the sum of the daily rates divided by the number of days with data.
  </Tab>

  <Tab title="Custom rates">
    Enter custom rates manually if your group applies standardized exchange rates.

    * Define the currency cross (for example, EUR/USD) and enter monthly rates.
    * Francis extrapolates the first rate you enter backward across all prior months.
    * Francis does not extrapolate forward. Enter a rate for every month up to your most recent closed month. Where a rate is missing, Francis uses zero for that period.
    * You can supply both average and closing rates.
  </Tab>
</Tabs>

Once you have added a rate source, open the configuration settings for the relevant accounting integration. Francis detects the base currency automatically. Set the exchange rate source and select your target currency. If you import from Google Sheets, set the base currency manually.

<Warning>
  You can't switch rate source from a chosen date. Changing the exchange rate source applies to the full history, so closed periods are retranslated at the new rates and your historical figures move. If you have been running on custom rates and want market rates going forward, you have two options: stay on custom rates and keep entering them monthly to preserve historical consistency, or switch to market rates and accept that historical figures will differ. Switching from a specific date is on the roadmap.
</Warning>

## Conversion method

Francis applies a standard conversion approach:

* **P\&L (income and expenses):** translated at the monthly average rate, which approximates transaction-date rates.
* **Balance sheet (assets, liabilities, and equity):** translated at the monthly closing rate, which reflects the financial position at period end.

This approach has two effects.

### Current and historical rates

Francis translates opening balance sheet amounts at the current month's closing rate. So balance sheet values can move on exchange rate shifts alone, even with no new journal entries.

<Accordion title="Show example">
  <table style={{tableLayout: "fixed", width: "100%"}}>
    <thead>
      <tr>
        <th style={{textAlign: "left", width: "50%"}}>Base currency</th>
        <th style={{textAlign: "left", width: "16%"}}>Jan 25</th>
        <th style={{textAlign: "left", width: "16%"}}>Feb 25</th>
        <th style={{textAlign: "left", width: "16%"}}>Mar 25</th>
      </tr>
    </thead>

    <tbody>
      <tr>
        <td>Long-term loan, starting value</td>
        <td>0</td>
        <td>5,000</td>
        <td>5,500</td>
      </tr>

      <tr>
        <td>Long-term loan, delta</td>
        <td>5,000</td>
        <td>500</td>
        <td>200</td>
      </tr>

      <tr>
        <td>Long-term loan, ending value</td>
        <td>5,000</td>
        <td>5,500</td>
        <td>5,700</td>
      </tr>
    </tbody>
  </table>

  <table style={{tableLayout: "fixed", width: "100%"}}>
    <thead>
      <tr>
        <th style={{textAlign: "left", width: "50%"}}>Target currency</th>
        <th style={{textAlign: "left", width: "16%"}}>Jan 25</th>
        <th style={{textAlign: "left", width: "16%"}}>Feb 25</th>
        <th style={{textAlign: "left", width: "16%"}}>Mar 25</th>
      </tr>
    </thead>

    <tbody>
      <tr>
        <td>Long-term loan, starting value</td>
        <td>0</td>
        <td>5,250</td>
        <td>6,235</td>
      </tr>

      <tr style={{color: "#A8C0F8"}}>
        <td>Exchange rate adjustment, starting value</td>
        <td>0</td>
        <td>500</td>
        <td>1,925</td>
      </tr>

      <tr>
        <td>Long-term loan, delta</td>
        <td>5,250</td>
        <td>575</td>
        <td>300</td>
      </tr>

      <tr>
        <td>Long-term loan, ending value</td>
        <td>5,250</td>
        <td>6,235</td>
        <td>8,550</td>
      </tr>

      <tr>
        <td>FX closing rate</td>
        <td>1.05</td>
        <td>1.15</td>
        <td>1.50</td>
      </tr>
    </tbody>
  </table>

  ```
  // Calculating exchange rate adjustment, starting value
  5000 * (1.15 - 1.05) = 500
  ```
</Accordion>

### Average and closing rates

Francis translates P\&L items at average monthly rates, while the matching balance sheet entries use closing rates. So the P\&L and balance sheet can apply slightly different rates to the same underlying journal entries.

<Accordion title="Show example">
  <table style={{tableLayout: "fixed", width: "100%"}}>
    <thead>
      <tr>
        <th style={{textAlign: "left", width: "40%"}}>Profit and loss</th>
        <th style={{textAlign: "left", width: "20%"}}>Base currency</th>
        <th style={{textAlign: "left", width: "15%"}}>Rate</th>
        <th style={{textAlign: "left", width: "25%"}}>Target currency</th>
      </tr>
    </thead>

    <tbody>
      <tr>
        <td>Revenue</td>
        <td>10,000</td>

        <td />

        <td>10,500</td>
      </tr>

      <tr>
        <td>Costs</td>
        <td>-5,000</td>

        <td />

        <td>-5,250</td>
      </tr>

      <tr style={{color: "#A8C0F8"}}>
        <td>Net income</td>
        <td>5,000</td>
        <td>× 1.05</td>
        <td>5,250</td>
      </tr>
    </tbody>
  </table>

  <table style={{tableLayout: "fixed", width: "100%"}}>
    <thead>
      <tr>
        <th style={{textAlign: "left", width: "40%"}}>Balance sheet</th>
        <th style={{textAlign: "left", width: "20%"}}>Base currency</th>
        <th style={{textAlign: "left", width: "15%"}}>Rate</th>
        <th style={{textAlign: "left", width: "25%"}}>Target currency</th>
      </tr>
    </thead>

    <tbody>
      <tr>
        <td>Retained earnings, starting value</td>
        <td>0</td>

        <td />

        <td>0</td>
      </tr>

      <tr style={{color: "#A8C0F8"}}>
        <td>Retained earnings, delta</td>
        <td>5,000</td>
        <td>× 1.10</td>
        <td>5,500</td>
      </tr>

      <tr>
        <td>Retained earnings, ending value</td>
        <td>5,000</td>

        <td />

        <td>5,500</td>
      </tr>

      <tr>
        <td>FX average rate</td>
        <td>1.05</td>

        <td />

        <td />
      </tr>

      <tr>
        <td>FX closing rate</td>
        <td>1.10</td>

        <td />

        <td />
      </tr>
    </tbody>
  </table>

  ```
  // Exchange rate effect, average to closing rates
  5000 * (1.10 - 1.05) = 250
  ```

  <Note>
    The **5,500** difference in retained earnings breaks down into **5,250** (retained earnings at average rates) and **250** (the adjustment from average to closing rate).
  </Note>
</Accordion>


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