Multicurrency Consolidations

Overview

This article explains the process of Multicurrency Consolidation in detail.

Processing
 

1. What currencies are involved in rate capture and calculation?

• Rates are captured and calculated from the Home Currency of the current company (i.e., the company being consolidated upwards) to the Home Currencies of all its higher-level parents. In this way, the rollup process (see below) is ready to use either or both of the Direct or Step-by-Step methods of currency translation.

• What we mean by “is ready to use either or both of the Direct or Step-by-Step methods”: if Company 1 is the parent of Company 2 and Company 2 is the parent of Company 3, and each of the companies uses a different reporting currency, rates are captured/calculated as follows:

  • From Company 1’s Home Currency to Company 2’s Home Currency. This permits a Step-by-Step translation of Company 1’s accounts at the reporting level of Company 2.

  • From Company 1’s Home Currency to Company 3’s Home Currency. This permits a Direct translation of Company 1’s accounts at the reporting level of Company 3.

  • From Company 2’s Home Currency to Company 3’s Home Currency.

2. Capturing the Balance Sheet rate (in the Perform Financial Report Data Roll-up function)

• See Exchange Rate Schedule Object (SYFOREXSCHEDNO), above.

  • If the consolidation is being performed in mid-period, the Balance Sheet rate is read as the Current Spot Rate for the date that the Perform Financial Report Data Roll-up function is run. This permits preliminary consolidations to be run prior to period-end.

  • If the consolidation is being performed at period-end, the Balance Sheet rate is read as the Month End Spot Rate for the end date of the period being closed.

  • The Balance Sheet rate may be manually overridden in the period’s Closing Profile (GLCLOSE) record via the Period Close function.

3. Calculating the P & L rate

• See Exchange Rate Schedule Object (SYFOREXSCHEDNO), above.

  • The process averages the Current Spot Rates in effect from the first day of the accounting year until (1) the current date, if the calculation is being performed in mid-period, or (2), the period-end date if the calculation is being performed at period-end.

  • The P & L rate may be manually overridden in the period’s Closing Profile (GLCLOSE) record via the Period Close function.

4. Historical rates (Balance Sheet and P & L) by GL account.

• Concurrent with the forthcoming release of the Unrealized Foreign Exchange (UFX) functionality, historical rates may be entered for individual GL accounts. If entered for an account, they will override the captured/calculated rates produced by the Perform Financial Report Data Roll-up function.

5. The rollup process (in the Perform Financial Report Data Roll-up function)

• The Perform Financial Report Data Roll-up function may be run

  • From the subsidiary, in which case the subsidiary’s accounts are rolled up to each of its higher-level parents.

  • From the parent, in which case all of its subsidiaries’ accounts are rolled up to the parent.

• The choice of running from the parent or subsidiary level is up to the user-level financial management. It will generally depend on the level of control demanded by the top-level parent company. The final results are the same regardless of which approach is used.

• The roll-up process may be run any number of times during a period, but it must be run whenever a subsidiary’s account balances change if consolidated financial reports are to be produced after the change.
   

SEE ALSO

Multicurrency Operations 
Multicurrency Considerations in Sales and Accounts Receivable  
Multicurrency Considerations in Purchasing and Accounts Payable  
Multicurrency Considerations in Bank Reconciliation  
Multicurrency Considerations in Financial Reporting