INFORMATION
- Products: Sparkrock 365
- Summary: Currency and exchange rate management in the process of company consolidation.
DETAILS
This article indicates how to define the rate of return to be used by the consolidation process when multiple companies are involved.
- How to set the exchange rate to be used by each GL Account during the consolidation process.
- Definition of the exchange rate to be used in the consolidation of each company.
- Manual assignment of the rafter rate to be used in the consolidation of each company.
IMPACT / RISKS
In case of not having the correct configuration, the consolidation process could use a different exchange rate than the desired one, generating erroneous values in the consolidation.
RESOLUTION
In order to correctly configure the exchange rate to be used by the consolidation process, the following process must be carried out.
1. The exchange rate to be used must be indicated on the card of each G/L Account.
| Exchange rate | Typical use |
| Average Rate (Manual) | You manually calculate the average rate for the period to consolidate. Calculate the average either as an arithmetic average or as a best estimate and specify the result for each business unit. Used for income statement accounts. |
| Closing Rate | Used for balance sheet accounts. |
| Last Closing Rate | The rate that was valid in the foreign exchange market on the date for which the balance sheet or income statement is being prepared. You enter this rate for each business unit. Used for balance sheet accounts. |
| Historical Rate | The exchange rate that was valid when the transaction occurred. |
| Composite Rate | The current period amounts are translated at the average rate and added to the previously recorded balance in the consolidated company. This method is typically used for retained earnings accounts because they include amounts from different periods and are therefore a composite of amounts translated with different exchange rates. |
| Equity Rate | This is similar to Composite. Differences are posted to separate general ledger accounts. |
2. In the Business Unit Card, it should be indicated whether the exchange rate to be used in the consolidation process should be taken from the company of origin of the transactions or from the consolidating company. Local (of the consolidating company) or Business Unit (of the company from which the data originates)
3. Before executing the consolidation process, the exchange rate to be used must be validated and, if required, it can be modified manually.
WORKAROUND
Not Applicable
RELATED INFORMATION
None
UPDATE HISTORY
| Date | Details | Link |
| 09/22/2023 | Created the first version of this KB |
ATTACHMENT
Not Applicable
Attachments (1)
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