Film Accounting Glossary
Exchange rate
What is an exchange rate?
Also called FX rate, or budget rate.
An exchange rate is the price of one currency in another, and on any cross-border production it is a live cost driver rather than a footnote.
Productions fix a budget rate at closing and then report variances against it as the real rate moves, which is why a shoot can go over budget in home currency while every department stayed on budget locally. Currency hedges exist to remove exactly this exposure.
Example
A budget fixed at 1.27 dollars to the pound reports every UK cost at that rate. When the market moves to 1.34, a department that spent exactly its £180,000 budget shows a $12,600 overage in dollars, caused by nobody on the crew.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
Fixed at budget approval, then reported against as the real rate moves. Kept in its own variance line so it is not mistaken for overspending.
Common mistake
Reporting exchange movement inside department variances. A department that spent exactly its local budget appears over, and the real cause is invisible.
Related questions
- What is a budget exchange rate?
- The rate fixed at budget approval, used to translate foreign spend consistently, so movement against it can be reported separately from department performance.
- How do productions manage exchange rate risk?
- By hedging with a forward contract, and by isolating any unhedged movement in its own variance line rather than spreading it across departments.