Why multi-currency accounting is essential
Swiss SMEs that sell to or purchase from abroad deal with transactions in euros, dollars, pounds or other currencies on a daily basis. The Code of Obligations (CO) requires accounts to be kept in the company's functional currency — typically the Swiss franc (CHF) — but also permits parallel bookkeeping in a foreign currency, provided that conversion and transparency principles are respected.
Multi-currency management is not a luxury reserved for multinationals: any SME that issues or receives invoices in a foreign currency, holds bank accounts in EUR or USD, or operates in international e-commerce must tackle conversion challenges, exchange differences and correct balance-sheet valuation.
This guide examines every aspect of multi-currency accounting for Swiss SMEs in detail: from day-to-day bookings to year-end valuation, from exchange rate management to VAT implications on foreign invoices.
When multi-currency accounting is needed
Not every SME needs a structured multi-currency accounting setup. Here are the main scenarios where it becomes indispensable:
Exporting goods or services
If you regularly invoice in EUR, USD or other currencies to foreign clients, each invoice triggers a CHF conversion at booking time and a potential exchange difference at collection.
Importing and purchasing from abroad
European or international suppliers invoice in foreign currency. The actual CHF cost varies between the invoice date and the payment date, generating exchange differences that must be recorded.
Foreign-currency bank accounts
If your SME holds accounts in EUR, USD or GBP, the balances must be revalued at the closing rate at year-end. Value changes are recorded as unrealised exchange differences.
E-commerce and international online sales
International marketplaces and payment gateways (Stripe, PayPal, Amazon) generate receipts in multiple currencies that must be converted and reconciled with CHF accounting records.
Foreign-currency contracts and loans
Financing, leases or long-term contracts denominated in a foreign currency require periodic revaluation and exchange-difference management on the outstanding balance.
How to book foreign-currency transactions
Recording a foreign-currency transaction follows a precise process to ensure correct conversion and traceability:
Identify the transaction currency
Determine the original currency of the invoice or document (EUR, USD, GBP, etc.) and verify that the chart of accounts includes the necessary multi-currency accounts (e.g. receivables in EUR, payables in USD).
Determine the applicable exchange rate
Use the exchange rate on the transaction date (spot rate) or a monthly average rate, depending on the adopted accounting policy. The FTA publishes monthly and annual reference rates.
Record the amount in original currency and in CHF
Every entry must show both the amount in the original currency and the CHF equivalent calculated at the applied rate. This dual amount is essential for subsequently calculating exchange differences.
Record the exchange difference on collection or payment
When the client pays (or you pay the supplier), the actual exchange rate may differ from the one used at booking. The difference must be posted as a realised gain or loss on foreign exchange.
Reconcile foreign-currency balances
Periodically verify that the book balance in foreign currency matches the actual balance of the bank account or the receivable/payable position, factoring in all recorded exchange differences.
Exchange rate management
The method chosen for determining exchange rates affects accounting accuracy and compliance. Here are the main sources and methods accepted in Switzerland:
| Source / Method | Frequency | Application |
|---|---|---|
| Spot rate (daily) | Per transaction | Maximum precision — the rate on the transaction date is applied. Ideal for SMEs with few foreign-currency transactions |
| FTA monthly average rate | Monthly | The FTA publishes monthly average rates accepted for VAT returns and bookkeeping. Practical for SMEs with moderate volumes |
| FTA annual average rate | Annual | Usable for tax returns and simplified valuation. Less precise but accepted by the FTA for SMEs with regular transactions |
| Closing rate (31 Dec) | Annual | Mandatory for year-end revaluation of foreign-currency assets and liabilities under CO art. 960. The SNB or FTA closing rate is used |
Exchange differences: types and accounting treatment
Exchange differences arise from rate fluctuations between the booking date and the settlement or valuation date. Four fundamental types are distinguished:
Realised gains on foreign exchange
Occur when the exchange rate at collection (or payment) is more favourable than the one used at booking. Example: invoice issued at EUR 1.00 = CHF 0.94, collected when EUR 1.00 = CHF 0.97. The CHF 0.03 per euro gain is posted to account 6960 (exchange gains).
Realised losses on foreign exchange
Occur when the rate at settlement is less favourable. Example: invoice received at EUR 1.00 = CHF 0.95, paid when EUR 1.00 = CHF 0.98. The CHF 0.03 per euro loss is posted to account 6960 (exchange losses).
Unrealised gains on foreign exchange
Emerge at year-end when revaluing foreign-currency assets at the closing rate produces a value higher than the book value. Under the prudence principle (CO art. 960a), these gains may be recognised only for short-term positions.
Unrealised losses on foreign exchange
Emerge at year-end when revaluation produces a lower value. Under the prudence principle, unrealised losses must always be recognised regardless of the position's maturity. This asymmetry is a core CO requirement.
Year-end valuation (CO art. 960)
At year-end, all assets and liabilities denominated in a foreign currency must be revalued at the closing exchange rate. Article 960 of the Code of Obligations sets out precise requirements:
Revaluation at the closing rate
Every foreign-currency position (receivables, payables, bank accounts, loans) must be converted at the exchange rate of 31 December (or the last day of the financial year). The reference rate is the one published by the FTA or the SNB.
Prudence principle (art. 960a CO)
Assets may not be valued above acquisition or production cost, except for short-term positions with an observable market value. Unrealised exchange losses must always be recognised; unrealised gains only if short-term.
Revaluation documentation
The revaluation process must be documented: list of foreign-currency positions, rate applied, difference calculation, accounting entries. This documentation serves as supporting evidence in the event of an audit.
Disclosure in the notes to the financial statements
The notes to the financial statements must state the conversion method adopted, the exchange rates used and the total amount of unrealised exchange differences recognised in the income statement.
Warning: failure to perform year-end revaluation or to recognise unrealised exchange losses constitutes a breach of the CO and may be challenged during an audit. Auditors systematically verify the correct valuation of foreign-currency positions.
VAT on foreign-currency invoices
Managing VAT on foreign-currency transactions requires particular attention to FTA rules:
- VAT must always be calculated and declared in CHF. Invoices issued in a foreign currency must be converted at the transaction-date rate or the FTA monthly average rate
- For input tax deduction on invoices received in a foreign currency, the CHF equivalent at the invoice-date rate or the FTA monthly average rate is decisive
- Exchange differences between the VAT booking date and the actual payment do not alter the VAT amount already declared — they are treated exclusively as financial exchange differences
- In the VAT return, exempt foreign turnover (exports) must still be reported in CHF under revenue figure 220, converted at the applicable rate
- For cross-border services subject to reverse charge (acquisition of services from abroad), VAT must be self-assessed in CHF at the rate on the date of supply
The FTA accepts both the transaction-date rate and the monthly average rate for VAT conversion. Once a method is chosen, it must be applied consistently for the entire tax period. Monthly average rates are published on the FTA website.
Practical tips for multi-currency accounting
- Set up the chart of accounts with dedicated accounts for each managed currency (e.g. 1021 Bank EUR, 1022 Bank USD, 1101 Receivables EUR) — separation simplifies reconciliation and revaluation
- Adopt a consistent exchange-rate method and document it in the internal accounting manual: spot rate for material one-off transactions, FTA monthly average for recurring operations
- Automate exchange-rate updates: modern accounting software like AccountEX imports daily or monthly rates automatically, eliminating transcription errors
- Reconcile foreign-currency balances at least monthly by comparing the book balance with the bank statement in the original currency — discrepancies indicate unrecorded exchange differences
- Do not postpone revaluation to year-end: perform quarterly revaluations to obtain a realistic view of the balance sheet and avoid surprises at closing
- For international e-commerce, configure automatic conversion rules for each payment gateway (Stripe, PayPal) and periodically verify that converted amounts match actual receipts
- Use AccountEX to manage multi-currency accounting automatically: automatic conversion at the updated rate, exchange-difference calculation, year-end revaluation and integrated VAT reporting
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