34 Understand Detailed Currency Restatement

This chapter contains these topics:

• Section 34.1, "Overview,"

• Section 34.2, "Which Ledgers Are Used to Calculate Gains and Losses?"

• Section 34.3, "How Are Gains and Losses Calculated on a Foreign Transaction?"

• Section 34.4, "What Happens If You Use Alternate Ledgers?"

• Section 34.5, "What Steps Are Required for Detailed Currency Restatement?"

• Section 34.6, "What Transactions Are Processed?"

• Section 34.7, "What Happens with Reviewing and Posting?"

34.1 Overview

Companies operating in countries with highly inflationary currencies often need to:

• Report financial results in two currencies - the local currency and a parent company's currency

• Maintain a second set of books in a stable currency for financial analysis and reporting

• Maintain dual reporting for certain classes of general ledger accounts, such as fixed assets, inventory, and equity accounts, to meet accounting standards

Detailed Currency Restatement gives you a way to work at the transaction level with two base currencies:

• Domestic currency (AA ledger)

• Alternate (stable) currency, typically U.S. dollars (XA ledger)

For every transaction in the domestic currency within the range or ranges of accounts specified in the AAI setup, the system creates a corresponding transaction in the alternate (stable) currency.

Figure 34-1 Detailed Currency Restatement

Detailed Currency Restatement is integrated into the General Accounting, Accounts Receivable, Accounts Payable, and Fixed Assets systems. This feature includes special handling for voids, reversals, and gain or loss calculations.

34.2 Which Ledgers Are Used to Calculate Gains and Losses?

The system creates restatement gain or loss records between the AA and XA ledgers when you post payments or receipts. The calculations differ, depending on the type of transaction:

• For domestic transactions (AA ledger to XA ledger), the system creates records for restatement gains or losses in the XA ledger and shows them on the post report, which lists the AA entries.

• For foreign transactions (CA ledger to XA ledger), the system:

  • Calculates the CA ledger to AA ledger gain or loss, and then restates that amount to the XA ledger. The system shows this gain or loss on the post report that lists the XA entries.

  • Calculates the AA ledger to XA ledger gain or loss. The system shows this gain or loss on the post report that lists the AA and CA entries.

The following illustrates a foreign transaction (Chilean Peso = CLP) entered for a Colombian company (COP) that uses an alternate (stable) currency (USD). This shows the gain and loss created between the foreign (CA), domestic (AA), and alternate (XA) ledgers.

Figure 34-2 Foreign Transaction Showing the Gain and Loss Between Foreign, Domestic, and Alternate Ledgers

Description of "Figure 34-2 Foreign Transaction Showing the Gain and Loss Between Foreign, Domestic, and Alternate Ledgers"

Ledger	Description
AA-> XA	The gain or loss amount is calculated between COP and USD when a payment or receipt is posted.
CA-> AA	The gain or loss amount is calculated between foreign (CLP) and domestic (COP). It is then written to the AA ledger. This amount is restated to the XA ledger by the Detailed Currency Restatement program.
CA-> XA	No calculation is performed between the CA and XA ledger. The net amount of the two previous calculations is the equivalent of the gain or loss between the CA ledger and the XA ledger (transaction amount to restated amount).

34.2.1 Example: Gain or loss for a Domestic Voucher

The following is an example of a domestic voucher entered for a Colombian company (COP) that uses detailed currency restatement. Their alternate (stable) currency is USD. This example shows how a domestic voucher creates gain or loss amounts for the alternate ledger (XA).

34.2.1.1 Voucher and Payment

Item	AA Ledger Domestic Transaction Amount	AA Ledger Currency Code	Exchange Rate (/)	XA Ledger Alternate Currency Calculated	XA Ledger Currency Code	Gain (-)/ Loss (+)
Voucher - original rate	85,000	COP	850	100.00	USD
Payment - current rate	85,000	COP	860	98.84	USD	1.16-

34.2.1.2 Journal Entries

Description	Account	AA Ledger Amounts	XA Ledger Amounts
Voucher	Expense Account Accounts Payable	85,000 85,000-	100.00 100.00-
Payment	Accounts Payable Cash Realized Gain	85,000 85,000-	100.00 98.84- 1.16-

34.3 How Are Gains and Losses Calculated on a Foreign Transaction?

Gains and losses are calculated by measuring the changes in exchange rates when a transaction is processed.

The system performs two steps when calculating the gain or loss amount for a foreign transaction. These steps are described below. The examples in the steps use the following information:

Date	Document	CA Ledger (CLP)	x Exchange Rate	AA Ledger (COP)	/ Exchange Rate	XA Ledger (USD)
06/01/17	Voucher	100,00	.75	75,000	750	100.00
	Payment	100,00	.76	76,000	800	95.00
	Gain(-)			1,000		5.00-Net
	Loss(+)

1. The gain or loss record in the AA ledger (calculated as shown between the CA and AA ledgers) is converted to the XA ledger using the exchange rate from the AA to the XA ledger in effect on the G/L date of the payment.

   Figure 34-3 Converting the Loss Record in the AA Ledger to the XA Ledger

   
   Description of "Figure 34-3 Converting the Loss Record in the AA Ledger to the XA Ledger"
   
   

2. A gain or loss amount is also derived from the AA and XA ledgers. This amount is calculated using the voucher amount and the exchange rate difference between the voucher and payment dates.

Figure 34-4 Gain/Loss Amount Derived from the AA and XA Ledgers

Description of "Figure 34-4 Gain/Loss Amount Derived from the AA and XA Ledgers"

34.4 What Happens If You Use Alternate Ledgers?

If you use alternate ledgers to record transactions by domestic origin (YA ledger) and foreign origin (ZA ledger), the system updates the alternate ledger records using one of three methods, depending on where the transaction originated.

Transaction	Description
Domestic transaction in the AA currency	There is no CA record. The system: Restates the AA amount into the XA ledger Copies the AA amount to the YA ledger
Foreign transaction in the XA currency	The system copies the CA amount to both the XA and ZA ledgers.
Foreign transaction in a currency other than XA	The system: Restates the AA amount into the XA ledger Copies the XA amount to the ZA ledger

The following illustrates the alternate ledgers used in detailed currency restatement:

Figure 34-5 Alternate Ledgers Used in Detailed Currency Restatement

Description of "Figure 34-5 Alternate Ledgers Used in Detailed Currency Restatement"

34.5 What Steps Are Required for Detailed Currency Restatement?

Detailed currency restatement consists of these steps:

1. Set up detailed currency restatement.

2. Update the daily exchange rate table as needed.

3. Run the Detailed Currency Restatement program.

4. Review and approve the detailed currency transactions.

5. Post the detailed currency transactions to the general ledger.

34.6 What Transactions Are Processed?

The Detailed Currency Restatement program processes all posted transactions in the Account Ledger table (F0911) that qualify, as follows:

• The company is set up for detailed currency restatement.

• The transaction contains a blank in the Currency Update (ALT9) field.

• The account is within the account ranges for AAI item CRxx.

For each processed transaction, the program updates the Currency Update field to indicate the result of processing. Other programs also update this field. The following shows the codes and the programs that use them to update the field:

Code	Program
P (processed)	Written by the Detailed Currency Restatement program.
N (not applicable)	Written by the Detailed Currency Restatement program for either of the following: Company is not set up for detailed restatement. Account is not within a range of AAIs defined for detailed currency restatement.
Y (YA ledger only)	Written by the journal entry functional server (XT0911Z1) for JX document types and for journal entries with an override rate of zero. The Detailed Currency Restatement program changes the code to P (or N) after it processes the records.

The first time you run this program, processing might require a significant amount of time because it will update the Currency Update field for all qualified records in the Account Ledger table. Subsequently, the program updates only the new transactions that qualify.

34.7 What Happens with Reviewing and Posting?

You can review the detailed currency transactions batch by batch. The Detailed Currency Restatement program assigns the batch number of the originating (AA) batch to the transactions it creates for the alternate currency. Only the batch type is XX.

You can review a transaction created by detailed currency restatement, although you cannot change it. You can post the detailed currency transactions to the Account Ledger table (F0911) as a part of the Detailed Currency Restatement program, or in the normal posting process with AA ledger transactions.