TRAVERSE Global v11.1

Exchange Method

If you have multiple individual companies with different currencies, you may want to generate consolidated financial reports, which involves translating/exchanging the various currencies to calculate gain/loss values for the reports.

The translation of the account balances for P&L Accounts must be done differently than Balance Sheet Accounts. P&L Accounts (Type 500 thru 899) represent the net change for a given period and are translated using a per-period based exchange rate. Balance Sheet Accounts (Type < 500) represent a period balance and are translated using the exchange rates relative to the given reporting period. In addition to the translation differences, the variance between the two calculations is needed to represent the gain/loss for translated values on a consolidated statement.

There are three methods for applying exchange rates to the calculated values:

  • Default: Uses the account type to identify the exchange method to use for currency translation. Profit & Loss (Type 500 through 899) Accounts use per-period exchange rates. Balance Sheet (Type <500) Accounts use exchange rates relative to the reporting period.
  • Period: Uses the per-period exchange rate for currency translation. This means the period in which the account balance exists determines the exchange rate used to translate the balance.
  • Relative: Uses the column relative period exchange rate for currency translation. A given column on the report represents an ending period. This ending period or year determines the single period exchange rate used to translate the balance.

Example:

Exchange Rates
Period Currency Rate
1 USD (Base) 1.0
1 EUR 0.9
2 USD (Base) 1.0
2 EUR .8

 

Accounts
Account Currency
P&L Base USD
P&L Foreign EUR
Balance Sheet Base USD
Balance Sheet Foreign EUR

 

Period Account Balances
Account Period Account Balance Base Balance
P&L Base 1 100 100
P&L Foreign 1 100 90
Balance Sheet Base 1 100 100
Balance Sheet Foreign 1 100 90
       
P&L Base 2 200 200
P&L Foreign 2 200 160
Balance Sheet Base 2 200 200
Balance Sheet Foreign 2 200 160

 

PTD Balance in EUR as of Period 2 using account type translation (default)
Account Pd Balance Base (USD) Balance   Foreign Balance  
P&L Base 1 100 USD 100 100 USD * 0.90 90 EUR P&L uses Period 1 Rate
P&L Foreign 1 100 EUR 90 100 EUR 100 EUR No Exchange
Balance Sheet Base 1 100 USD 100 100 USD * 0.80 80 EUR Balance Sheet uses Period 2 Rate
Balance Sheet Foreign 1 100 EUR 90 100 EUR 100 EUR No Exchange
             
P&L Base 2 200 USD 200 200 USD *.80 160 EUR P&L uses Period 2 Rate
P&L Foreign 2 200 EUR 160 200 EUR 200 EUR No Exchange
Balance Sheet Base 2 200 USD 200 200 USD *.80 160 EUR Balance Sheet uses Period 2 Rate
Balance Sheet Foreign 2 200 EUR 160 200 EUR 200 EUR No Exchange