Multi-Currency

R12 General Ledger Management Fundamentals

Objectives

After completing this lesson, you should be able to do the following:• Define foreign currencies• Enter foreign currency journals• Revalue foreign currency balances• Translate functional balances into foreign currency• Describe how RC affects General Ledger activities

Overview of Multi-Currency

Pounds

Yen Dollar Euro

Translation

Revaluation

Conversion

Foreign Currency Concepts

There are three key concepts in Oracle General Ledger that pertain to foreign currency:

Integrating with Subledgers

Foreign currency obligation is entered in Oracle Payables

Payables journal entry is recorded in General Ledger

Foreign currency is revalued and the unrealized gain or lost is recorded

Payables journal entry is recorded in General Ledger

Realized foreign currency gain or loss is calculated

Foreign currency obligation is paid in Oracle Payables

Reporting Currencies

• Useful for consolidation reporting and analysis

• No need to physically move balances to create views of consolidation data

• Beneficial for parent consolidation entities that share the same chart of accounts and calendar with their subsidiaries

• Tighter link to ledgers!• For accounting and

reporting in another currency (in addition to the ledger's primary currency)

• Can be used with Primary or Secondary ledgers

Business Reasons Benefits

Defining Currencies

Use the Currencies window to define and enable or disable currencies

Conversion Overview

Oracle General Ledger converts journal amounts entered in a foreign currency to functional currency equivalents using daily conversion rates

Functional currencyForeign currency

Yen DollarConversion

Conversion Example

Functional currency

Entered Journal Entry Lines

DR. Accounts Receivable………………….10,000 Euro

CR. Revenue…………………………………………10,000 Euro

CONVERT 1 Euro = .8 US Dollars

DR. Accounts Receivable………………….… 8,000 US$

CR. Revenue……………………………………….….. 8,000 US$

Foreign currency

Defining Conversion Rate Types

Foreign Currency Journals

Functional Currency Journals

Rate Types:–Spot–Corporate–User–EMU Fixed–User Defined

Daily Rates

5-1-97 JPY/US SPOT .71555-1-97JPY/CAD CORP .0112

Entering Daily Rates

• Rates are Shared Across Ledgers• Loading Daily Rates Automatically

Revaluation Overview

Revalue account balances to reflect the change in the foreign currency rate from the date a transaction is entered and the reporting date

Paris

New York

Original U.S. Receivable1000 Euro

550 U.S. Dollars

Revalued U.S. Receivable1000 Euro

600 U.S. Dollars

USD Unrealized Gain50 U.S. Dollars

Revaluation Process

Functional currency Functional currency

Conversion at the time of the foreign currency transaction

Revaluation at the end of the accounting period

Foreign currencies

Foreign currencies

Running Revaluation

Collect Foreign Currency Receivable

Is the foreign Currency Receivable Still Unpaid?

Reverse Revaluation Journals

Revalue Foreign Currency Balances

Post to Unrealized Gain/Loss Account

Post to Realized Gain/Loss Account

Yes

No

Revaluation Example

REVALUE 1 Euro = .81 US Dollars

CR. Unrealized Gain…………………………………….. 100 US$

Entered Journal Entry LinesDR. Accounts Receivable………………….10,000 Euro

CR. Revenue…………………………………………10,000 Euro

Convert 1 Euro = .8 US DollarsDR. Accounts Receivable………………….… 8,000 US$CR. Revenue……………………………………….….. 8,000 US$

DR. Accounts Receivable………………….… 100 US$

– Maintain consistency among different conversion rates and currencies

– Minimize imbalances during intercompany eliminations due to exchange rate differences

– Maintain daily rates and historical rates more easily

Currency Rates Manager Description

• A new user-friendly tool to manage daily and historical rates

• Global companies can now:

Daily Rates Historical Rates

Currency Rates Manager Description (continued)

• Upload daily rates from a spreadsheet or enter and maintain rates in the new Web-interface

• Cross Rate Rules automatically calculate the cross rates between two or more currencies

• Upload and download historical rates via a spreadsheet

• Added security prevents uploading rates to closed periods

Currency Rates Manager Benefits

Easy-to-Use Interface• Enter and maintain daily rates in the new Web-interface

or spreadsheet interfaceImproved Efficiency• Quickly upload daily and historical rates from a

spreadsheet• Copy historical rates from one ledger to another

Better Consistency• Apply Cross Rate Rules to ensure consistency across

currency rates by automatically calculating the cross rates between two or more currencies

From ToCurrency

Date TypeConversion

USD EUR 30-Sep-03 Spot .900252 1.1108000871

USD JPY 30-Sep-03 Spot 116.81 .0085609109

The following currency rates have been defined:

Currency Rates Manager will calculate the cross rate between EUR and JPY and its inverse From To Date TypeEUR JPY 30-Sep-03 Spot 129.753

EUR JPY.0077069509JPY EUR

Using Cross Rate Rules

Translation Overview

Foreign currency translation is a process that lets you restate your functional currency account balances into a reporting currency

Foreign currency

Functional Balance Sheet

Assets Liabilities

ForeignBalance Sheet

Assets Liabilities

100,000 60,000

Period endRate = 0.75

HistoricalRate = 0.70

75,000 45,000

Owner's Equity

Owner's Equity

40,000

28,000

Period endRate = 0.75

Functional currency

Translation

General Ledger selects translation rates based on the GL Account Type and Translation Rate Type:

Monetary Assets, Liabilities

Non-Monetary Assets, Liabilities

Revenue, Expense

Equity

GL Account Type Period-End Period-Average Historic

Balances and Rates Used for Translation

Account Type

Assets

Liabilities

Revenue

Expense

Equity

Balance and Rate Used in Translation

Cumulative balance and period-end rate

Periodic balances and period average rates

Periodic balances and period average rates

Cumulative balance and period-end rate

Cumulative balance and period-end rate unless historical rates are defined for these accounts

Cumulative TranslationAdjustment Account

Japanese Yen

Translate

U.S. Dollar

Cumulative Translation Adjustment Account

Net difference to balance translated chart of accounts

Historical Rates

• Historical Rates are a weighted average rate for transactions that occur at different times

• Historical Rates are used to report journal entry line amounts in the units of money that were current when the transactions took place

• Historical balances are the opposite of inflation adjusted balances

Translation with HistoricalRates and Amounts

• If you have defined historical rates or amounts, Oracle General Ledger selects one of two amounts that is used to arrive at a translated balance for your account:– Account Balance– Net Activity

• The amount differs depending on the type of account to which the historical rate or amount applies:– Revenue/Expense– Asset/Liability– Owner's Equity

Translating Owners' Equity Accounts

General Ledger translates owners' equity accounts in accordance with SFAS #52 (U.S.), using historical rates or amounts and one of the following rules:• Period-to-Date• Year-to-Date

Department

Secondary Tracking Segment

Company

Balancing Segment

Line of Bus.

Cost Center Segment

Account

Natural Account Segment

Subsidiary

Intercompany Segment

Secondary Tracking Segment Description

Process, analyze and audit business units by two segments: • Primary Balancing Segment • Secondary Tracking Segment

Balancing Segment

Secondary Tracking Segment Account

Co DeptRevaluation Unrealized Gains/Losses

Year End Close

Translation

Process

Co Dept Retained Earnings

Co Dept Retained Earnings/CTA

Secondary Tracking Segment Description (continued)

Each account can be tracked by unique pairs of values for the balancing segment and secondary tracking segment

Secondary Tracking Segment Benefits

Better Audit and Analysis• Provides more detail to retained earnings, cumulative

translation adjustments and revaluation gains/losses accounts

Better Control and Consistency• Maintains consistency for similar transactions within a

ledger because this option is set at the ledger levelGreater Flexibility• Choose any segment, except your balancing or natural

account segment, to act as the secondary tracking segment

How to Set Up Secondary Tracking Segment

Department

Secondary Tracking Segment

Company

Balancing Segment

Line of Bus.

Cost Center Segment

Account

Natural Account Segment

Subsidiary

Inter-company Segment

Company Department

Balancing Segment

Secondary Tracking Segment and Cost Center

Segment

Account

Natural Account Segment

Using Secondary Tracking Segment

The following chart of accounts structure exists:

Secondary Tracking Segment Closing and Translation Example

Account

01.200.Expense01.200.Revenue01.100.Expense01.100.Revenue

Year End Close and Translation creates accounts by pairs of segments

USDBalance

200 DR300 CR500 DR

1,000 CR

CumulativeRate

125140120135

Translated YEN

25,000 DR42,000 CR60,000 DR

135,000 CR

Account

01.200.Retained Earnings01.100.Retained Earnings

USD Balance

100 CR500 CR

CalculatedRate

170150

Translated YEN

17,000 CR75,000 CR

Secondary Tracking Segment Revaluation Example

Revaluation creates accounts by pairs of segments

Revalued Accounts

01.200.Liability01.200.Asset01.100.Liability01.100.Asset

Unrealized Gain/Loss Accounts Generated

01.200.Unrealized Gain01.100.Unrealized Loss

Amount

200 DR300 DR 500 DR

1,000 CR

Amount

500 CR500 DR

Calculated

Period

Prior

Automatically Assigned Rate Types

Period Rates Listing

Historical Rates Listing

Daily Conversion Rates Listing

Foreign Currency Listings

Review the rates defined for any accounting period using standard listings from the Submit Requests window

Foreign Currency Reports

• Foreign Currency General Ledger Report• Foreign Currency Journals Report• Foreign Currency Detail Trial Balance Report• Foreign Currency Summary 1 Trial Balance• Translation Trial Balance• Foreign Account Analysis Report• Foreign Account Analysis Report with Payables Detail

Multi-Currency Profile Options

• GL: Income Statement Accounts Revaluation Rule• GL: Revaluation: Autoquery Last Run Ranges• GL: Owners Equity Translation Rule• Journals: Allow Multiple Exchange Rates• Journals: Display Inverse Rate

Summary

In this lesson, you should have learned how to:• Define foreign currencies• Enter foreign currency journals• Revalue foreign currency balances• Translate functional balances into foreign currency• Describe how RC affects General Ledger activities