When and for what length of period is it acceptable to use an average exchange rate? CRA responded:
[F]or purposes of determining a taxpayer's income, the CRA will generally accept the use of an average exchange rate over a given period of time (e.g., annual, quarterly or monthly) to convert amounts arising from foreign currency transactions, if all of the following conditions are met:
- the amounts (as determined in foreign currency) are relatively stable and evenly distributed over the given period
- the amounts arising in the particular period are sufficiently frequent that they do not distort income
- the relevant exchange rate does not fluctuate significantly over the period; and
- the chosen approach is used consistently from year to year.
… [I]f there are very few transactions (e.g. annual, semi-annual or quarterly payments), the use of the applicable daily exchange rates will be required.
As a general rule, the CRA will not accept the conversion of a gain or loss on the disposition of a capital property using an average exchange rate. … Consequently, the daily exchange rate for the particular dates should be used to determine, in Canadian dollars, the adjusted cost base ("ACB") of such property and any proceeds of disposition from its disposition.