Transaction exchange gain or loss

A transaction exchange gain or loss is triggered when there is a fluctuation in the exchange rate of two currencies that are applied to a business transaction. For example, an American business commits to pay a European supplier in Euros, and the U.S. Dollar weakens between the date when the supplier issues an invoice and the date when it is due for payment, causing the American company to pay more Dollars to settle its obligation. The increased number of Dollars required to pay the supplier is a transaction exchange loss.