Understanding Foreign Currency Processing

You can define and maintain tables that describe currency codes, exchange rates, market rates, and currency rate types. All PeopleSoft applications use the same market rate and currency pages and tables, enabling you to administer centralized currency controls throughout the PeopleSoft integrated product lines. For example, Enterprise Integration Points (EIPs) can be used to keep market rate data synchronized across multiple databases, such as the PeopleSoft Financials, Supply Chain Management, and the PeopleSoft Human Resources Management System.

PeopleSoft software converts journal entries that are denominated in a foreign currency to the base currency and stores all relevant information for later analysis and reporting. Multicurrency journal entries are posted in both foreign and base currencies. A foreign currency is any currency other than the base currency.

PeopleSoft software translates posted balances into different currencies according to the rules that you define and calculates gains or losses due to restatement. As with other background processes, you can run this process at any time.

The multibook feature for PeopleSoft General Ledger and its feeder systems enables you to use multiple base currencies, each in the form of a ledger that is defined for a business unit. Each ledger may have its own base currency, or it may inherit the base currency from the General Ledger business unit. In a multibook environment, you can post a single transaction to all base currencies (all ledgers) or to only one of those base currencies (individual ledger). For example, you can carry one set of books in your local (functional ) currency and another set of books in the currency of your parent organization (reporting) currency. The translation to a reporting currency is in realtime. So, you do not have to run the translation process at month end, but you can still use the process to get the translated result at month end if you choose to do so.

You can use a secondary multibook ledger as a currency translation ledger within a ledger group. The currency translation ledger functions as your reporting ledger by maintaining realtime balances for all accounts in the specified currency during the accounting period. At the end of the accounting period, you can run the Translate Within Ledger process to generate a translation adjustment within the multibook currency translation ledger for selected accounts. This enables you to maintain the realtime balance for certain accounts in the ledger.

PeopleSoft software maintains currency translation ledgers differently from the way it maintains other secondary ledgers within a multibook ledger group. Typically, when a transaction is posted to a multibook ledger group, the system uses the foreign currency amount of the primary ledger as the transaction amount of the secondary ledger. However, currency translation ledgers use the base currency amount of the primary ledger as the transaction amount.

In relation to currencies, PeopleSoft software uses terminology that is consistent with generally accepted accounting principles based on the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB).

Currency refers to the denomination of a monetary transaction. PeopleSoft applications use a currency code (CURRENCY_CD) to identify and track individual currencies. Although the system does not require it, it is good practice to use International Standards Organization (ISO) currency codes. PeopleSoft applications have no limits on the number of currencies that you can use.

Important currency terms are:

Important currency calculation types are:

When you adjust the base currency value of balance sheet accounts that are maintained in a foreign currency, this is termed revaluation. You generally perform revaluations at the end of each accounting period to reflect the actual base currency value of assets and liabilities as exchange rates fluctuate between the base and foreign currencies. You make adjusting entries to the accounts that are being revalued with an offsetting entry to a revaluation gain or loss account. The gain or loss account is sometimes referred to as an unrealized exchange gain or loss.

In this example and as shown in this graphic, a London based subsidiary of a Swiss company records a purchase made in Mexican pesos. The Swiss company is owned by a United States corporation.

Multicurrency calculations

The following correlates the terminology and the currencies:

Currency dictates the precision of monetary amounts. For example, United States dollar amounts have two digits to the right of the decimal and Japanese yen have none. PeopleSoft software addresses currency precision as follows:

• PeopleSoft software delivers currency sensitive amount fields with a standard length of 23.3, or 23 digits to the left of the decimal point and 3 digits to the right of the decimal point.

• By default, PeopleSoft software rounds all currency sensitive amount fields to the currency precision of the associated currency. This action is a PeopleTools option that you can deactivate.

• All numbers on SQR reports are currency sensitive. For reporting with PS/nVision, the display is equal to the field precision, but you can increase the number of decimals.