Example of an Approach to the Conversion

You can approach converting the existing base currency to a new base currency in many different ways. Each company is unique and has its own internal business requirements. Many manufacturing companies, for example, might convert to a new base currency during an off-peak season or holiday when disruptions are less notable, whereas other companies might convert at the beginning of a fiscal or calendar year. Discuss the conversion with the auditors and base the decision on the business requirements and, if applicable, any legal requirements.

This is an example of how you might approach converting to a new base currency at the beginning of a calendar year. Use this example to generate discussion within the company and help determine the conversion strategy that works best.

A Japanese company plans to convert their base currency from the Japanese yen (JPY) to the Canadian dollar (CAD) at the beginning of a new calendar year (January 1, 2010) using this approach:

1. Complete entering year 2009 entries in the existing base currency (JPY) between December 31, 2009 and January 9, 2010.

   Limit the number of year 2009 transactions entered during those 10 days.

2. On January 10, 2010, copy the production environment. This copy is the audit trail for 2009 and prior year books.

3. If auditor adjustments are required for year 2009, enter them in both the copy of the production environment (step 2) and the production environment (step 4).

4. Convert the production environment to CAD as of January 10, 2010.

5. Enter transactions for year 2010 in the production environment, using January 1, 2010 as the start date for the transactions.