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realised gains and losses

Realised FX gains or losses reflect the change in the value of foreign currency denominated sales/purchase transactions that have been settled prior to the close of the accounting period. For example, a U.S.-based company sells EUR 100,000 worth of motor vehicle parts to a European distributor. When the invoice was recognised, the spot EUR-USD rate […]

reconciliation

Reconciliation is an accounting concept that refers to the process of confirming that a set of two records are in agreement. Payment reconciliation is an important task for accounting teams. It involves comparing an account payable with what has actually been paid or, in the case of an account receivable, with the actual incoming payment, […]

reference exchange rate (central bank)

Reference exchange rates are a set of daily foreign exchange rates published by leading central banks. Reference exchange rates are used by companies and other participants in FX markets. They are based on a regular daily concertation procedure between the central bank and leading commercial banks. Reference exchange rates are published for information, not trading, […]

repatriation of profits

Repatriation of profit is the ability of a firm to send foreign‐earned profits or financial assets back to the firm’s home country in hard currency such as USD, EUR and others, after meeting the host nation’s tax obligations. Proponents of profit repatriation argue that it encourages foreign direct investments (FDIs). Opponents argue that profit repatriation […]

reporting currency

The reporting currency is the monetary unit used by a firm to record its transactions and to present its financial statements. The reporting currency is also known as the accounting currency or presentation currency. In most cases, the reporting currency is also the firm’s ‘functional currency’, i.e. the currency in which it primarily generates and […]

reserve currency

A reserve currency is a currency that central banks hold as part of their foreign exchange reserves. This currency is often used for their international transactions. There are several features of an international reserve currency: a large transaction area, stable monetary policy, absence of controls, a strong central state, some significant backing in terms of […]

restricted currency

A restricted currency, also known as ‘blocked’ or non-convertible currency, is the monetary unit of a country where holders of the currency do not have the right to convert it freely at the going exchange rate into any other currency. A currency is considered to be restricted if it fulfills one or more of the […]

revolving credit

A revolving credit is a financial arrangement in which a bank or other lending institution allows a business or individual to borrow funds for purchases or investments as they require them. Revolving credits work like credit cards. The lending bank guarantees a maximum amount that can be loaned to the customer. Whenever the customer draws […]

risk diversification

In FX management, risk diversification refers to foreign exchange risk being managed centrally on a portfolio basis. This approach allows the firm to manage FX exposures in several currency pairs by taking advantage of natural offsets and currency correlations existing within the portfolio. When it is considered practical, the remaining exposures are hedged with forward […]

risk management framework

In FX risk management, a Risk Management Framework (RMF) is the structured process used to identify the sources of currency risk and to define the goals of a hedging program aimed at eliminating or minimising the impact of this risk. The Risk Management Framework should allow management to achieve the goals of a hedging program […]