Realised and Unrealised Balances

Foreign Bank Account Revaluation

Realised and Unrealised Variation

When a foreign Bank Account is revalued, the system calculates two amounts in base currency:

Variation Realised – the FX effect on the portion of the period’s movement that moves the account towards a zero balance.

Variation Unrealised – the FX effect required to revalue the remaining closing foreign balance at the valuation exchange rate, after realised variation has been applied.

This approach ensures that:

• FX on amounts that are effectively settled/consumed (reducing exposure to foreign currency) is treated as realised, and
• FX on the balance still held (remaining exposure) is treated as unrealised.

How the system decides whether deposits or withdrawals drive the realised calculation

The system compares:

• the opening balance sign (positive, zero, or negative), and
• the direction of the net period movement (net deposit or net withdrawal)

to decide whether the “towards zero” portion is represented by withdrawals or deposits for that period.

Practical interpretation:

• If the opening balance is positive (in credit), a net withdrawal moves the balance towards zero.
  realised variation is calculated against withdrawals (the “towards zero” portion).
• If the opening balance is negative (overdraft), a net deposit moves the balance towards zero.
  realised variation is calculated against deposits (the “towards zero” portion).
• If the opening balance is zero, the first movement is away from zero (an exposure is being created).
  realised variation is calculated using the side that represents the “towards zero” component within that period’s activity (typically the first “spend/settle” leg, when both deposits and withdrawals exist in the same period).

In other words: the realised calculation is anchored to the activity that represents reducing exposure, and that depends on whether you started in credit, overdraft, or zero.

Calculation sequence

The system always calculates in this order:

Variation Realised

• Determine which portion of the period’s activity moves the account towards zero.
• this portion is used to calculate Variation Realised.

Variation Unrealised

• Revalue the closing foreign currency balance at the valuation exchange rate.
• Subtract the base currency balance after including Variation Realised.
• The remaining difference is Variation Unrealised.

Unrealised variation is therefore always calculated after realised variation. If a foreign bank account’s closing balance is zero, any unrealised variation remaining is cleared (because there is no foreign currency position left to revalue).

Worked Example – Zero Opening Balance Account

This example shows how Variation Realised and Variation Unrealised are calculated when a foreign Bank Account starts the period with a zero balance.

Scenario

• Bank account currency: USD
• Period opening balance: USD 0.00
• Deposit USD 1,000.00 at exchange rate 0.75
• Withdrawal USD 750.00 at exchange rate 0.65
• Revaluation exchange rate: 0.80

Interpreting the movement

The account starts at zero.

• The deposit moves the balance away from zero, creating a foreign currency exposure.
• The withdrawal moves the balance back towards zero, reducing that exposure.

Because deposits are greater than withdrawals, the net effect is a deposit and the closing balance is USD 250.00.

• The portion of activity that moves towards zero (the withdrawal) gives rise to realised variation.
• The remaining balance (USD 250) represents foreign currency still held and will be valued through unrealised variation.

Current Rate

Because the opening balance is not greater than zero, the withdrawal exchange rate is used as the current rate.

Current Rate

= Withdrawal Activity ÷ Withdrawal Activity (Base Currency)

= -750 ÷ -1,153.85

= 0.65

Opening Activity

Opening Activity

= Minimum of (− Period Opening Balance) and Deposit Activity

= Min(0, 1,000)

= 0

Current Activity

Current Activity

= Minimum of (− Withdrawal Activity) and (Deposit Activity − Opening Activity)

= Min(750, 1,000)

= 750

This represents the portion of the period’s activity that moves the balance towards zero.

Current Activity (Base Currency)

Current Activity (Base Currency)

= Ratio(Current Activity, Deposit Activity − Opening Activity)

× (Deposit Activity Base Currency − Opening Activity Base Currency)

= (750 ÷ 1,000) × 1,333.33

= 1,000.00

Variation Realised (Base Currency)

Current Realised

= (Current Activity ÷ Current Rate) − Current Activity (Base Currency)

= (750 ÷ 0.65) − 1,000

= 153.85

Variation Realised

= 153.85

Variation Unrealised (Base Currency)

Period Closing Balance (Base Currency) before revaluation

= Opening Balance + Deposits + Withdrawals

= 0 + 1,333.33 − 1,153.85

= 179.48

Variation Unrealised

= (Period Closing Balance ÷ Revaluation Rate)

− (Closing Balance before Revaluation + Variation Realised)

= (250 ÷ 0.80) − (179.48 + 153.85)

= −20.83

Worked Example – Positive Opening Balance Account

This example shows the same calculation where the account starts the period with a positive opening balance.

Scenario

Opening balance: USD 250.00

Opening balance (Base Currency): NZD 312.50

Opening unrealised: NZD −20.83

Deposit USD 1,700.00 at exchange rate 0.75

Withdrawal USD 1,250.00 at exchange rate 0.65

Revaluation exchange rate: 0.80

Interpreting the movement

The account opens with a positive balance.

• Withdrawals move the balance towards zero.
• Deposits move the balance away from zero.

Although deposits are greater than withdrawals and the closing balance increases, part of the withdrawals still represent movement towards zero and therefore give rise to realised variation.

The remaining increase in balance is valued as unrealised variation.

Opening Rate

Opening Rate

= Period Opening Balance ÷ (Opening Balance Base Currency − Opening Unrealised)

= 250 ÷ (312.50 − −20.83)

= 0.75

Current Rate

Because the opening balance is positive, the deposit exchange rate is used.

Current Rate

= Deposit Activity ÷ Deposit Activity (Base Currency)

= 1,700 ÷ 2,266.67

= 0.75

Opening Activity

Opening Activity

= −1 × Minimum of (Opening Balance, Withdrawal Activity × −1)

= −1 × Min(250, 1,250)

= −250

This represents the portion of withdrawals that reduce the opening balance (movement towards zero).

Current Activity

Current Activity

= −1 × Minimum of (Deposit Activity, (Withdrawal Activity − Opening Activity) × −1)

= −1 × Min(1,700, 1,000)

= −1,000

Opening and Current Activity (Base Currency)

Opening Activity (Base Currency)

= Ratio(Opening Activity, Withdrawal Activity) × Withdrawal Activity (Base Currency)

= (−250 ÷ −1,250) × −1,923.08

= −384.62

Current Activity (Base Currency)

= Ratio(Current Activity, Withdrawal Activity − Opening Activity)

× (Withdrawal Activity Base Currency − Opening Activity Base Currency)

= (−1,000 ÷ −1,000) × −1,538.46

= −1,538.46

Variation Realised (Base Currency)

Opening Realised

= (Opening Activity ÷ Opening Rate) − Opening Activity (Base Currency)

= (−250 ÷ 0.75) + 384.62

= 51.29

Current Realised

= (Current Activity ÷ Current Rate) − Current Activity (Base Currency)

= (−1,000 ÷ 0.75) + 1,538.46

= 205.13

Variation Realised

= 51.29 + 205.13

= 256.41

Variation Unrealised (Base Currency)

Period Closing Balance (Base Currency) before revaluation

= 312.50 + 2,266.67 − 1,923.08

= 656.09

Variation Unrealised

= (700 ÷ 0.80) − (656.09 + 256.41)

= −37.50

Summary

• Realised variation is calculated on the portion of activity that moves the balance towards zero.
• Unrealised variation is calculated afterwards to revalue the remaining balance.
• Whether deposits or withdrawals drive the realised calculation depends on the sign of the opening balance and the net movement for the period.