14 Forecast error. Royce Ltd is a UK firm with future receivables one year from now in Canadian dollars and Brazilian real. Its Brazilian real receivables are known with certainty, and its estimated Canadian dollar receivables are subject to a 2% error in either direction.

The pound values of both types of receivables are similar.

There is no chance of default by the customers involved. Royce’s treasurer says that the estimate of pound cash flows to be generated from the Brazilian real receivables is subject to greater uncertainty than that of the Canadian dollar receivables. Explain the rationale for the treasurer’s statement.