1. Multicurrency Processing Implementation Guide
  2. Example: Realized Gain/Loss on a Foreign Invoice and Alternate Currency Receipt

Example: Realized Gain/Loss on a Foreign Invoice and Alternate Currency Receipt

In this example, a French company enters three invoices in Canadian dollars (CAD) and receives payment in Japanese yen (JPY).

When the receipt is entered, the receipt amount (JPY) is compared to the foreign and domestic invoice amounts to determine whether the debt has been satisfied. Because the three currencies involved in the transaction fluctuate against one another, the potential exists for:

  • Standard gain/loss between EUR and CAD.

  • Alternate currency gain/loss between JPY, CAD, and EUR.

    Description

    Currency

    Amount

    Exchange Rate January 1

    Exchange Rate February 1

    Invoice (domestic)

    EUR

    356.34

    Invoice (foreign)

    CAD

    500.00

    1 CAD = 0.71268 EUR

    Receipt

    JPY

    38,850

    1 CAD = 0.70882 EUR

    1 JPY = 0.009163 EUR

    1 JPY = 0.01287 CAD

    Standard gain/loss

    EUR

    –1.93

    Alternate currency gain/loss

    EUR

    + 1.57

The foreign currency invoice on January 1 for 500.00 CAD, which is 356.34 EUR in the domestic currency. The EUR amount is calculated as follows:

  • 500.00 CAD Ã 0.71268 = 356.34 EUR

    The alternate currency receipt on February 1 is 38,850 JPY.

    The foreign currency amount applied to the invoice is 500.00 CAD.

  • 38,850 JPY Ã 0.01287 = 500.00 CAD

    The domestic currency amount applied to the invoice is 354.41 EUR.

  • 500.00 CAD Ã 0.70882 = 354.41 EUR

    The domestic currency amount of the receipt is 355.98 EUR

  • 38,850 Ã 0.009163 = 355.98 EUR