In a previous blog we talked about posting foreign currency transactions.
Today we are looking at different angle. We are posting domestic transactions in a foreign legal entity (CAD in a Canadian legal entity) and consolidating them into a USA legal entity.
To do this we are going to automatically 'translate' the CAD transactions into USD, and also automatically 'revalue' the balances to reflect the current USD value.
1a. Setup Currency Exchange Rates
Like the earlier blog (Part 9 above) we will setup two new default rates as exhibited below.
General ledger > Currencies > Currency exchange rates
1b, Main Accounts
Create the following three Main Accounts.
Account Name Type FC reval. Exch. type Reporting type
101010 Petty Cash Asset Yes Default Default
320111 APIC, 111 Equity No blank blank
320112 APIC, 112 Equity No blank blank
Note: the Equity accounts are Foreign Currency Revaluation is set to "No" because they are non-monetary accounts. This will be discussed in further detail later in today's blog.
Example settings for Petty Cash Main Account
1c. Post two vouchers to the Canadian legal entity
Key and post two voucher like exhibited.
Note: Same CAD amounts for each voucher, but different dates (11/30 and 12/31)
Use the same 'year' as the rates setup above.
General ledger > Journal entries > General journals
2a. Consolidate in the United States legal entity
Consolidated November.
Choose the proper dates.
Consolidate > Consolidate, online > Criteria (tab)
Choose the Canadian legal entity (CA01).
Consolidate > Consolidate, online > Legal entities (tab)
Usually non-monetary accounts are not revalued, thus use the 'transaction date" setting, and are are set to not revalue in the Main Account (1b. above). Non-monetary accounts usually include accounts like Inventory, Fixed Assets, and Equity.
See your accountant to verify the Main Account settings above (FC Reval Yes/No), and the related method settings that follow.
Choose the currency translation methods
Choose to revalue the Petty Cash monetary account at the "consolidation date" rate.
Choose to revalue the Additional Paid In Capital (APIC) non-monetary accounts at the "Transaction date" rate.
Consolidate > Consolidate, online > Currency translation (tab)
Exhibit: Settings for Main Account 101010
Exhibit: Settings for both Main Accounts 320111 & 320112
Run the consolidation.
Repeat the consolidation, with the same settings, except
use date range 12/1/2023 to 12/31/2023
2b. Trial Balance
Run Trial Balance report in the Consolidation legal entity (C01).
General ledger > Inquiries and reports > Trial balance
Note: All Trial Balance amounts in Consolidation company (C01) are in USD.
We have successfully automatically 'translated' our two CAD transactions to USD at the default rates for November and December.
3a. Revalue the Consolidation legal entity
Now we want to know how much the assets are worth at December 31.
The system has correctly 'translated' the November and December activity at the corresponding month end (default) rates. The November rate for the Petty Cash asset is no longer applicable as of December 31, thus we will revalue.
Since we do not have sub ledger entries in Accounts Receivable and Accounts Payable, we will skip those modules and go directly to the General ledger module.
Key the parameters and post the Foreign Currency Revaluation in the Consolidation legal entity (C01).
General ledger > Periodic > Foreign Currency Revaluation
Exhibit: Foreign Currency Revaluation Voucher
It is recommended that Foreign Currency Revaluation be run in the Consolidation legal entity after each monthly consolidation.
3b. Trial Balance
Run another Trial Balance report in the Consolidation legal entity (C01).
General ledger > Inquiries and reports > Trial balance
Note: All Trial Balance amounts in Consolidation company (C01) are in USD.
We have successfully automatically 'translated' (step 2) and 'revalued' (step 3) foreign currency transactions from CAD to USD in our consolidation company.
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