Would you use P2P Currency Exchange? 1

Currencies

A P2P platform simply brings together people with complementary currency exchange requirements. So if User A wants to exchange dollars for euros and User B is looking to exchange euros for dollars, they can do so over a P2P currency exchange. By harnessing the power of the crowd, users are thus able to obtain much better exchange rates than they would get through traditional currency exchange mechanisms.

CurrencyFair Ltd, for instance, claims that it can save up to 90% on international currency transfer fees. While £2,000 transferred through a typical bank could cost as much as £100 (£40 in international transfer fees and £60 in exchange rate margin), the same amount sent through CurrencyFair would only cost about £9 (a fixed £3 transfer fee plus £6 exchange rate margin). CurrencyFair charges an average of 0.35% of the amount exchanged as its margin, while TransferWise Ltd charges 0.5%.

The mechanism for P2P currency exchange is straightforward. A client opens an account with a P2P exchange and deposits money into the account. He or she then converts the money into the desired currency by “matching” with other clients on the P2P exchange. The foreign currency is then transferred to an overseas bank account nominated by the client.

Some P2P companies are controlled by FCA rules for example Midpoint and Transferwise whilst other are covered by EU rules such as Currency Fair, so you might want to check who regulates the P2P that you choose.

It can take up to 48 hours to match a deal which could be an issue in some cases.

The cost is definitely cheaper but in addition on large deals you may be able to negotiate further savings.

steve@bicknells.net

Do you know how FRS102 is changing Currency Conversion? 1

Currencies

FRS102 affects many things and Section 30 sets out the rules on Currency Conversion.

FRS 102 states that

An entity can conduct foreign activities in two ways. It may have transactions in foreign currencies or it may have foreign operations. In addition, an entity may present its financial statements in a foreign currency

Entities will have a Functional Currency (a concept also used in IFRS) and it allows translation into a Presentation Currency

Reporting at the end of the subsequent reporting periods
30.9 At the end of each reporting period, an entity shall:
(a) translate foreign currency monetary items using the closing rate;
(b) translate non-monetary items that are measured in terms of historical cost in a foreign currency using the exchange rate at the date of the transaction; and
(c) translate non-monetary items that are measured at fair value in a foreign currency using the exchange rates at the date when the fair value was determined.

30.10 An entity shall recognise, in profit or loss in the period in which they arise, exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous periods

That all sounds pretty familiar, however, as pointed out by Grant Thornton

Under SSAP 20 Foreign currency translation in current UK GAAP, where matching forward contracts are in place for a transaction, the contracted rate can be used for translation of the matched transaction. This option is not permitted under FRS 102. Instead, a foreign exchange forward contract will be recognised on the balance sheet as a financial instrument at fair value and the associated debtor or creditor will be retranslated at the year-end rate.
There are also changes to Goodwill valuation
A key difference (FRS102) to note in comparison to SSAP 20 Foreign Currency Translation is that SSAP 20 regards consolidated goodwill as an asset of the parent company and not the subsidiary. [Steve Collings Blog]
steve@bicknells.net

Do you accept Bitcoins? you could be missing out 2

Three Bitcoin digital currency coins

Bitcoins (BTC) are a digital currency that can be bought and sold for cash.

Watch this Video which explains how Bitcoins work

Here is a link to a UK Bitcoin Exchange

https://bitbargain.co.uk/

According to Bitcoin the current market price is $109.74 and currently 50,000 transactions are done per day using bitcoins.

These rules are enforced collectively by the Bitcoin network.

  • Hard limit of about 21 million bitcoins.
  • Bitcoins are divisible to 8 decimal places, yielding a total of approximately 21×1014 currency units.
  • Transactions are cheap and mostly free.

Before you dismiss it as another crazy idea, both the BBC and Institute of Directors have commented on Bitcoins, in this months  (June 2013) Director Magazine, page 17, 60 Second Expert, the IoD gave an excellent summary of key points including this comment on system safety:

US security expert Dan Kaminsky referred to the system as an ‘alien technology’ written to a standard of quality you don’t see in most software.

Bitcoin transactions are secured by military grade cryptography. Nobody can make a payment on your behalf or charge you money without having a copy of your wallet.

Mobile payments can be made too…

Bitcoin on mobiles allows you to pay with a simple two step scan-and-pay. No need to swipe your card, type a PIN, or sign anything. And all you need to do to receive Bitcoin payments is to display the QR code in your Bitcoin wallet app and let your friend scan your mobile, or touch the two phones together (using NFC radio technology).

International payments are quick…

Bitcoins can be transferred from Africa to Canada in 10 minutes. There is no bank to slow down the process, level outrageous fees, or freeze the transfer. You can pay your neighbors the same way as you can pay a member of your family in another country.

So should you accept payment by bitcoins?

steve@bicknells.net