GL Historical Rates

Overview

The GL Historical Rate process maintains the GL Historical Rate object (GLHISTRATE).

The GL Historical Rate object has two wholly separate and distinct purposes:

1. Unrealized foreign exchange (UFX):  It’s important to note that the GL Historical Rate object is used for UFX purposes only in unusual circumstances and that many companies that use the UFX process will not need to incorporate GL Historical Rates.

  NOTE  Please refer to Unrealized Foreign Exchange (UFX) for details about how GL Historical Rates are used in the UFX process.

2. Currency translation during financial consolidation:  When a subsidiary company’s accounts are rolled up into a parent company’s books, and the two companies use different home (functional) currencies, the subsidiary’s accounting results must be translated into the parent company’s home currency.

• This translation occurs in the Perform Financial Report Data Rollup process. As a rule, balance sheet accounts are translated at the current month-end exchange rate and P&L accounts are translated at the weighted average rate for the whole year.

• There may be circumstances that require a particular account to be translated at a historical rate unique to that account.

• That unique account and historical rate combination can be set up in the GL Historical Rate object, and the Perform Financial Report, Data Rollup process, will use it instead of the normal balance sheet or P&L rates. See the article on Multicurrency Consolidations for further details.

Navigation

Multiple Currency > GL Historical Rate

Processing

Fields
 

Purpose:  Has a value of either UFX or Translation and controls the behavior of the GL Historical Rate process. The Purpose field should be set first when a new record is entered.

  IMPORTANT  Once the new record is saved, the Purpose field cannot be changed after that.

Subsidiary Company:  Display only. This is the user’s current company.

Subsidiary Company Currency:  Display only. This is the home currency of the user’s current company.

Rate:  This is the historical rate itself. It must be greater than zero.

Starting Fiscal Year:  Required field. The year in which the historical rate goes into effect. It is selected from a menu of Fiscal Years defined for the Subsidiary Company.

Starting Period:  Required field. The period in Starting Fiscal Year in which the historical rate goes into effect.

Ending Fiscal Year:  Optional field. The year in which the historical rate is last in effect. It is selected from a menu of Fiscal Years defined for the Subsidiary Company and cannot be prior to the Starting Fiscal Year.

Ending Period:  The period in the Ending Fiscal Year in which the historical rate is last in effect. Must be entered if the Ending Fiscal Year is set and may not be entered if it isn’t.

  NOTE  The combination of the Ending Fiscal Year and Ending Period can be the same as the Starting Fiscal Year and Starting Period but cannot be prior to it.

Starting Fiscal Year, Starting Period, Ending Fiscal Year, and Ending Period:  Whether the GL Historical Rate record is being used for UFX or Translation purposes, historical rates of exchange are, by definition, rates that were valid in the past. Unless a GL Account is inactivated and will not be used for future transactions, no one can know its future historical rates. Therefore, when the latest known historical rate is entered for an active account, it only makes sense to specify the Starting Fiscal Year and Starting Period while leaving the Ending Fiscal Year and Ending Period unspecified.

  NOTE  When that historical rate is later superseded by a new one, the old rate’s Ending Fiscal Year and Ending Period must now be entered before the new rate is set up. The system will not allow two or more rates for the same purpose, account, and foreign currency to be in effect simultaneously.

  IMPORTANT If the GL Historical Rate is used on the UFX Account/Currency Summary record, the user can edit the 'Ending Fiscal Year' and 'Ending Period' fields. However, it is important to ensure that the values entered for 'Ending Fiscal Year' and 'Ending Period' are greater than or equal to the 'As of Date Exchange Rate' on the most recent UFX Run record associated with the UFX Account/Currency Summary record referencing the GL Historical Rate.

Fields

UFX purposes
 

Account:  This is the GL account for which a historical rate is being established. It must have an FX Type of Monetary Non-Cash and is selected from a menu of Monetary Non-Cash accounts.

Other Currency:  This is the foreign currency upon which the home currency value of the account is based. It is selected from a menu that shows all currencies defined in the Currency Master except the Subsidiary Company Currency.

  NOTE  For UFX purposes, there can only be one GL Historical Rate record in effect for any Account and fiscal period. Consequently, for UFX purposes, only one Other Currency may be defined per Account and effective date range.

Fields

Currency Translation purposes
 

Account:  This is the GL account for which a historical rate is being established. It may be any account in the Subsidiary Company’s chart of accounts.  

Parent Company if Translation:  This is one of the Subsidiary Company’s higher-level parent companies (as defined in the Financial Company Master). It is selected from a menu of the Subsidiary Company’s higher-level parent companies.

  EXAMPLE  If Company A is the Subsidiary Company’s next higher-level parent, and Company B is Company A’s next higher-level parent, the user may select either Company A or Company B as the Parent Company if Translation. GL Historical Rate records may exist simultaneously for a single Account and multiple parent companies.

Other Currency:  This is the home currency of the selected parent company. It cannot be overridden.

Translating the Retained Earnings Account

About Translating the Retained Earnings Account
 

During the month-end close, most GL accounts are translated from the subsidiary company currency to the parent company currency using the system-generated Balance Sheet and P & L rates, which are both based on the rates that were used throughout the year. The calculated Balance Sheet rate (the month-end rate from the Foreign Exchange Rate Schedule object for each period) is usually inappropriate for translating Capital (stockholder equity) accounts, which are usually translated at historical rates on an account-by-account basis. These historical rates live in the GL Historical Rate (GLHISTRATE) object, where, for the most part, they are manually entered as described in this article. In certain circumstances, however, Rootstock can set the coming year’s historical rate for the Retained Earnings account automatically during the year-end close process.

During the first year that Rootstock financials are used, the historical rate for the Retained Earnings account must be manually entered into the GL Historical Rate (GLHISTRATE) object, as with all other historical rates. In subsequent years, however, Rootstock can automatically calculate this rate for the coming year during each year's GL close. It does this by dividing the Retained Earnings at year-end in the parent currency (including the current year’s earnings) by the Retained Earnings at year-end in the subsidiary’s currency (also including the current year’s earnings). Rootstock can do this for two reasons: (1) it already has the soon-to-be prior year’s financial data on file, and (2) this is the kind of calculation for which there is only one correct answer. The calculated rate is then written to the GL Historical Rate (GLHISTRATE) object for use in the monthly close throughout the coming year.

For those who are interested in how this is done, the technical details are described below.

Technical Details of Translating the Retained Earnings Account

When closing Period 12 of the current year for a Consolidated Company (i.e., a Subsidiary Company with Parent Company and/or Grand Parent Company) using the Financial Period Close Process, the GL Historical Rate records with the 'Purpose' as 'Translation' for the next year will be created/updated if all the below conditions are satisfied:

• When the Subsidiary Company's Currency differs from the associated Parent Company and/or Grand Parent Company Currencies.

• When a Translation GL Historical Rate record exists for the combination of "Subsidiary & Parent Company" and "Subsidiary & Grand Parent Company" (if any) with (1) the current year's Period 12 and (2) the 'Account' as same as the 'Prior Years’ Retained Earnings' specified on the Financial Company Master.

When closing Period 12 of the current year, the Translation GL Historical Rate records will be created/updated as mentioned below:

• If no Translation GL Historical Rate record exists for the combination of "Subsidiary & Parent Company" and "Subsidiary & Grand Parent Company" (if any) for the next year, a new record will be created for the combination of "Subsidiary & Parent Company" and "Subsidiary & Grand Parent Company" (if any) for the next year with the 'Starting Period' as 1 and the 'Ending Period' as 12.

• When a Translation GL Historical Rate record exists for the combination of "Subsidiary & Parent Company" and "Subsidiary & Grand Parent Company" (if any) for the next year, it will be updated with the newly calculated 'Rate', 'Starting Period' as 1, and the 'Ending Period' as 12.

• If the Translation GL Historical Rate record exists for the combination of "Subsidiary & Parent Company" and "Subsidiary & Grand Parent Company" (if any) for the current year with the 'Ending Fiscal Year' and 'Ending Period' as any future value or blank, it will be updated with the 'Ending Fiscal Year' as the current year and the 'Ending Period' as 12. A new record will be created for the combination of "Subsidiary & Parent Company" and "Subsidiary & Grand Parent Company" (if any) for the next year with the 'Starting Period' as 1 and the 'Ending Period' as 12.

• When multiple Translation GL Historical Rate records exist for the same 'Subsidiary Company' and 'Parent Company if Translation' combination for the next year, only one will be updated, and the rest of the additional records will be deleted.

  EXAMPLE 1  Consider a Company 'Company-A' of Currency 'USD' with the Parent Company 'Company-B' of Currency 'CAD'.

• A Translation GL Historical Rate exists as below:

• And no Translation GL Historical Rate exists for the combination of "Company-A & Company-B" for the year 2022.

• Upon closing Period 12 of 2021 for Company-A, a new Translation GL Historical Rate record will be created as below:

  EXAMPLE 2  Consider a Company 'Company-A' of Currency 'USD' with the Parent Company 'Company-B' of Currency 'CAD'.

• Translation GL Historical Rate records exist as below:

• Upon closing Period 12 of 2021 for Company-A, the above GL Historical Rate records will be updated as below:

  EXAMPLE 3  Consider a Company 'Company-A' of Currency 'USD' with the Parent Company 'Company-B' of Currency 'CAD' and a Grand Parent Company 'Company-C' of Currency 'EURO'.

• Translation GL Historical Rate records exist as below:

• Upon closing Period 12 of 2021 for Company-A, the above GL Historical Rate records will be updated as below:

SEE ALSO
 

Financial Period Close Process
Unrealized Foreign Exchange (UFX)