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Translate foreign-currency receipts and payments into USD, then calculate the separate exchange-rate effect on cash. This example reconciles a US company's foreign subsidiary and changes one closing rate to show what moves.
A foreign currency cash flow statement example must separate actual cash movements from changes caused by exchange rates. Translate receipts and payments when they occur, translate opening and closing cash at their respective balance-sheet rates, and show the exchange effect as its own reconciliation line.
Consider an Ohio manufacturing company with a wholly owned subsidiary whose functional currency is the euro. The parent reports in USD. This example covers September 2026 and uses hypothetical rates, with each rate expressed as USD per EUR.
The controller has already established the functional currency and classified the transactions. There are no intercompany cash movements, restricted cash balances, acquisitions or disposals in this example. Those assumptions keep the example focused on currency rather than consolidation judgments.
Deloitte's discussion of ASC 830-230 explains that cash flows use transaction-date rates; an appropriately weighted average is acceptable when the result is substantially the same. It also describes preparing each foreign entity's functional-currency statement before translating and consolidating it.
Keep entity, bank account, transaction date, functional-currency amount, activity classification, rate and USD amount in the supporting export. Attach the rate source and the cash-account reconciliation. The broader cash flow statement example supplies the statement layout; this page supplies the currency bridge.
The subsidiary starts with EUR 100,000. Opening cash uses a rate of 1.08, making its opening reporting balance $108,000. The following are all its cash movements for the month; the operating payment includes all operating cash costs for this simplified example.
| Date | Cash movement | Activity | Amount (EUR) | Rate (USD per EUR) | Translated amount (USD) |
|---|---|---|---|---|---|
| September 5 | Customer collection | Operating | 400,000 | 1.09 | 436,000 |
| September 10 | Operating payments | Operating | -280,000 | 1.11 | -310,800 |
| September 16 | Equipment purchase | Investing | -50,000 | 1.12 | -56,000 |
| September 21 | Bank loan proceeds | Financing | 80,000 | 1.10 | 88,000 |
| September 25 | Loan principal repayment | Financing | -20,000 | 1.13 | -22,600 |
| Net cash movements | 130,000 | 134,600 |
Each USD amount equals the EUR amount multiplied by its row's rate. For a workbook with EUR in D2 and the rate in E2, enter =D2*E2 in F2 and fill down. Keep full calculation precision; all money shown here is rounded to whole units, and the displayed results have no fractional-dollar rounding difference.
Operating cash flow is 436,000 - 310,800 = $125,200. Investing cash flow is negative $56,000. Financing cash flow is 88,000 - 22,600 = $65,400. Together they produce 125,200 - 56,000 + 65,400 = $134,600.
The EUR account independently closes at 100,000 + 400,000 - 280,000 - 50,000 + 80,000 - 20,000 = EUR 230,000. That balance must match the subsidiary's cash reconciliation before any USD adjustment is accepted.
The September 30 closing rate is 1.15. Closing cash is therefore 230,000 × 1.15 = $264,500. The cash exchange effect is the difference needed to connect the independently established opening balance, translated flows and closing balance:
Exchange-rate effect on cash = Closing translated cash - Opening translated cash - Translated net cash flows
Here, 264,500 - 108,000 - 134,600 = $21,900. KPMG's statement of cash flows handbook, chapter 21, explains that this effect appears separately from the operating, investing and financing sections.
Do not accept the residual simply because it balances. Rebuild it from the same underlying amounts:
| Component | Calculation | Exchange effect (USD) |
|---|---|---|
| Opening EUR cash | 100,000 × (1.15 - 1.08) | 7,000 |
| Customer collection | 400,000 × (1.15 - 1.09) | 24,000 |
| Operating payments | -280,000 × (1.15 - 1.11) | -11,200 |
| Equipment purchase | -50,000 × (1.15 - 1.12) | -1,500 |
| Loan proceeds | 80,000 × (1.15 - 1.10) | 4,000 |
| Principal repayment | -20,000 × (1.15 - 1.13) | -400 |
| Total exchange effect | 7,000 + 24,000 - 11,200 - 1,500 + 4,000 - 400 | 21,900 |
The full proof is 108,000 + 125,200 - 56,000 + 65,400 + 21,900 = $264,500. Both methods agree. A missing payment would disturb the underlying EUR reconciliation even if someone forced the USD statement to balance.
The US parent has opening cash of $200,000, operating inflows of $70,000, investing outflows of $30,000 and financing outflows of $10,000. Its closing cash is 200,000 + 70,000 - 30,000 - 10,000 = $230,000.
| Statement line | Parent (USD) | Subsidiary (USD) | Group (USD) |
|---|---|---|---|
| Opening cash | 200,000 | 108,000 | 308,000 |
| Operating cash flow | 70,000 | 125,200 | 195,200 |
| Investing cash flow | -30,000 | -56,000 | -86,000 |
| Financing cash flow | -10,000 | 65,400 | 55,400 |
| Exchange effect on cash | 0 | 21,900 | 21,900 |
| Closing cash | 230,000 | 264,500 | 494,500 |
The group checks at 308,000 + 195,200 - 86,000 + 55,400 + 21,900 = $494,500. With intercompany transactions, use the consolidated cash flow statement process to identify and eliminate internal movements before interpreting group activity.
Now hold every receipt, payment and transaction-date rate unchanged, but change the closing rate from 1.15 to 1.05. This isolates the reporting effect of the closing currency value.
| Measure | Original case (USD) | Revised closing-rate case (USD) |
|---|---|---|
| Opening cash | 108,000 | 108,000 |
| Translated net cash flows | 134,600 | 134,600 |
| Closing cash: EUR 230,000 × closing rate | 264,500 | 241,500 |
| Exchange effect: closing - opening - flows | 21,900 | -1,100 |
The revised proof is 108,000 + 134,600 - 1,100 = $241,500. Closing USD cash falls by $23,000, entirely explained by 230,000 × (1.05 - 1.15). Operating cash generation did not change. Treasury should distinguish this reporting movement from the receipt and payment assumptions in its cash flow forecast.
Bring your entity cash schedules and documented exchange rates in a file; Covirage maps the columns, and its tools compute the translations and check the cash bridge while the external AI model explains the result with every figure traced to its rows. Create a free Covirage account and bring a sample of your own data.
See Covirage for finance teams for the reporting context.
An appropriately weighted average is permitted when it produces substantially the same result as transaction-date rates. Document that assessment. A large equipment purchase or borrowing may need its actual rate even when recurring operating receipts use a suitable average.
No. Show it separately in the reconciliation between opening and closing cash. It explains a change in the reporting-currency value of cash held in another currency, rather than a receipt from customers or a payment to suppliers.
Income statement exchange gains and losses can relate to receivables, payables or borrowings. The separate cash reconciliation concerns cash balances. Keep those schedules distinct and remove noncash transaction gains or losses appropriately when preparing the indirect operating reconciliation.
That change includes currency translation effects as well as cash movements. Start with the functional-currency cash schedule, translate its actual flows, and reconcile the remaining cash exchange effect. Otherwise a currency movement can be mistaken for operating activity.