Constant Currencies

A company does a lot of business in multiple countries. But because different nations operate in different currencies, it can be an accounting nightmare for all of that calculation and reporting. So companies use what are known as constant currencies to make the numbers cleaner.

Let’s say a U.S. company does a lot of business in Canada. The firm’s sales will fluctuate up and down depending on the Canadian Loonie’s value. However, this might not reflect itself in dollars because of the exchange rate. To ensure the sanity of their accountants and to help analysts make sense of performance, the company’s financial statement will assume a “constant” exchange rate on its financial reports.