Cross-border valuation: currency, FX date, and the footnote that saves the report
A single missing footnote on FX methodology has invalidated more cross-border valuations than any technical error. Here is how to write it.
A cross-border valuation carries three currency risks. First, the currency of measurement (what the asset is priced in locally). Second, the currency of reporting (what the client wants to see). Third, the currency of decision (what the lender or court will convert to at settlement). Mixing them up without a footnote is malpractice.
The rule is: measure in local, report in client's request, disclose FX at the valuation date. Cite the source of the FX rate (ECB reference rate, central bank of the local country, Bloomberg mid, XE.com) and the exact timestamp. If the valuation window spans multiple days, use the average or the closing rate of the last day and say which.
The saving footnote reads: "Values are stated in [reporting currency]. Underlying transactions and comparables are denominated in [local currency]. FX conversion applied at [rate] [source] as of [date]. A [X]% movement in the [local/reporting] pair changes the reported value by [Y]." Once you write this, no reviewer can invalidate the report on FX grounds.
GARAASSETS stores every FX rate used per case, cites the source automatically, and can regenerate the report at a different rate with one click if the client requests a re-basis.