Currency translation is run from the data monitor. Currency is translated based on the currency method assigned to each consolidation unit.
The currency translation log displays the values and rates used for the calculations:
- Currency Translation Key determines whether the periodic or YTD calculation is used.
- Exchange Rate: The AVG exchange rate is used for movements and the CLO exchange rate is used for opening balance.
- Reference Exchange Rate: The reference exchange rate is used to calculate currency translation differences.
You can right-click on a column in the log such as FS Item and choose the Group option to create subtotals. One or more columns can be grouped.
CT = currency translation key. This is determined in the currency translation method. The following list are the keys that are used the most:
- 1 – Translation of cumulative local values at the exchange rate for the current period
- 5 – Translation of each period at applicable rate for the period
- 6 – No re-translation of existing group currency value
Run currency translation to translate the currency of financial statements from the local currency (LC) into the group currency (GC) so that the financial statements from local companies can be included in the group results.
In reporting, you can easily view the data before and after currency translation by displaying the local and group currency values. Also, it's useful to add sub item to the report to display the currency translation adjustment in sub item 980.
It’s important to display subitems in currency-related reports because the translation varies for opening balance vs. changes and so forth.
When translating income statement items such as revenue, the average exchange rate is used to determine the group currency value. The currency translation adjustment is then posted to a separate FS item and subitem.
Let's look at a practical example of a revenue currency translation.
In the following image:
- The Revenue LC amount is -725.000 for the period movement (subitem 915)
- The average exchange rate is .80
- The reference exchange rate is .86
- The translation difference is -43500 (-623.500 + 5800.00)
- The Group Currency Amount is -623.500 = -725.000 x .86
In reporting, the currency translation adjustment of -43.500 includes -21.958.