The taskA USD total without its rate and source cannot be reproduced. Build one row per source event, preserve the original currency, and let the reviewer confirm the tax conversion convention. The example rates below are invented teaching data, not market rates or filing advice.

Choose the convention before calculating

The IRS currency guidance says federal income tax determinations use the functional currency, generally USD except for some qualified business units. Where USD is the functional currency, items affecting income tax are translated at the exchange rate prevailing when received, paid or accrued. The relevant event depends on the facts and accounting treatment.

Do not apply a year-end or annual-average rate automatically. Record why the chosen event and rate source fit the particular reporting requirement. For Form 5472, the instructions require relevant totals in U.S. dollars, and accrual-basis reporting corporations use accrued payments and receipts. This workpaper does not decide functional currency, method or reportability.

Worked example: quote direction changes the formula

Fictional invoice A is EUR 1,000. The reviewer-approved illustrative quote is 1 EUR = 1.10 USD. The calculation is 1,000 × 1.10 = USD 1,100.00. If the same quote is stored as EUR per USD, it is approximately 0.9090909, and the operation is division. Keep adequate rate precision; round the final amount according to the reviewed policy.

Fictional invoice B is EUR 500 with an illustrative quote of 1 USD = 0.80 EUR. The calculation is 500 ÷ 0.80 = USD 625.00. Multiplying would produce USD 400 and is the wrong orientation. This deliberate contrast is a useful review check.

Control total: the two converted invoice amounts are USD 1,725.00. That total is only arithmetic; it does not establish a tax category or deductible amount.

Bridge the conversion to the bank

Suppose the bank statement shows USD 1,090.00 received for fictional invoice A, with a separately documented USD 10.00 fee and no other difference. The bridge is 1,100.00 − 10.00 = 1,090.00. Keep the gross conversion, fee and net deposit in separate columns.

If settlement used a different rate or date, do not label the whole difference “fee.” Link the settlement statement, identify the remaining difference and leave its accounting/tax treatment to review. Conversely, a cash movement does not tell you the correct recognition date under an accrual method.

Preserve a rate that someone else can reproduce

  • Save the source name, exact URL or statement reference, retrieval date and effective date/time of the quote. A website homepage alone does not preserve the rate.
  • Record the currency pair with units: USD per EUR or EUR per USD. Write the actual operation, not only a cell formula.
  • Link each workpaper row to the invoice and transaction-log identifier. Flag missing documents, reversals and partial payments.
  • Reconcile row sums to the relevant ledger and keep adjustments separately. Do not silently overwrite the original currency.

Your private worksheet

Keep this record with your own source files. There is nothing to enter or upload here. Copy the headings, or open the plain-text sheet to save locally.

Open the text worksheet →

Source event
Transaction ID, document, original amount/currency; received, paid or accrued dates separately.
Reviewed convention
Functional currency, relevant event and reason for rate selection; reviewer and date.
Rate evidence
Source file/URL, quote date/time, retrieval date, pair and units; preserve the quoted precision.
Arithmetic
Original amount × or ÷ rate; unrounded amount; rounding policy; USD result.
Reconciliation
Gross converted amount, documented fee, net settlement, unexplained difference and source reference.

Two fictional files to compare

Invented examples with no real applicant, taxpayer number or live account.

Fictional file 1

The rate has no units

A spreadsheet stores “0.80” beside EUR 500 and reports USD 400.

Review result: The quote says EUR per USD. Divide to obtain USD 625; record the correction and retain the original row for traceability.

Fictional file 2

The bank receipt is lower

Invoice A converts to USD 1,100; only USD 1,090 arrives.

Review result: The fee statement supports USD 10 in this fictional case. Without that document, the difference remains unresolved rather than becoming an invented fee.

What completes this review?

Close the workpaper review when a second reader can reproduce each USD amount from preserved evidence and explain the reconciliation differences. This does not approve a return or establish foreign-exchange gain or loss.

Official sources

Checked November 4, 2026. A review date is not a form revision. Recheck current instructions and updates before acting; the worksheet is an organizational aid.