Different Settlement Currency Example
This is an example where the settlement is done in a currency other than the currency in which transfer is initiated.
Your company, InFusion Corporation, is a multinational conglomerate and operates in the United States (US), the United Kingdom (UK) and Singapore (SG). InFusion Corporation’s headquarter is in the US and has subsidiaries in the below countries.
| Country of Operation | Holding or Subsidiary | Company Name | Name of the Intercompany Organization |
|---|---|---|---|
| United States | Parent | InFusion US Inc. | US HQ Operations |
| United Kingdom | Subsidiary | InFusion UK Capital Services Inc. | UK Capital Services |
| Singapore | Subsidiary | InFusion Singapore Capital | SG Operations |
InFusion US Inc needs to transfer a working capital loan to its subsidiary in Singapore, namely InFusion Singapore Capital Pte. The funds will always be remitted through the subsidiary in the UK to manage the currency exposure.
Create an Intercompany agreement with these values:
| Field | Value |
|---|---|
| Intercompany agreement Number | Working Capital Loan to SG |
| Agreement Description | Working Capital Loan to SG |
| Transaction Currency | USD |
| Control Amount | 1,00,000.00 |
| Transaction Type | Invoicing for Loan |
| Conversion Rate Type | Corporate |
| Settlement Currency Basis | Transaction Currency |
Enter these value as route information:
| Field | Value |
|---|---|
| Provider Organization | US HQ Operations |
| First Clearing Organization | UK Services |
| Second Clearing Organization | blank |
| Receiver Organization | SG Operations |
The provider, US HQ Operations, need to transfer 20000 USD funds to the receiver, SG Operations, through the clearing organization, UK Capital Services. A transfer authorization is entered with below details:
| Field | Value |
|---|---|
| Transfer Authorization Reference | Working Capital Loan Feb 2024 |
| Transfer Authorization Number | Working Capital Loan Feb 2024-1 (Defaulted by the system) |
| Description | Working Capital Loan Feb 2024 |
| Transaction date | FEB-04-2024 |
| Transaction Amount | 20000 USD |
| Amount Type | Working Capital Loan Short Term |
This table demonstrates the transactions generated when transfer authorization is entered and processed for the scenario:
| Transaction Number | From Organization | To Organization | Route Type | Transaction Amount | Settlement CurrencyBasis | Settlement Amount | Conversion Rate Type | Rate Date | Rate | From Account | To Account | Status |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| USHQ-UKCS-1 | US HQ Operations | UK Capital Services | Provider to First Clearing | 20000 USD | Transaction Currency | 20000 USD | Corporate | Feb-04-2024 | 1.0 | 01-000-18039-00-00 | 02-000-20981-00-00 | New |
| UKCS-SGOP-1 | UK Capital Services | SG Operations | First Clearing to Receiver | 20000 USD | Transaction Currency | 20000 USD | Corporate | Feb-04-2024 | 1.0 | 02-000-18039-00-00 | 03-000-29081-00-00 | New |
UK operations manage offshore banking operations for the enterprise and have bank accounts in multiple currencies. To manage the currency exposure, UK operations receive funds in US dollars but further remit the funds to Singapore in SGD. The receiver organization – Singapore Operations are settling the funds in SGD.
You will edit the second leg of the transaction to change the settlement currency basis to Receiver ledger currency as demonstrated in below table.
| Transaction Number | From Organization | To Organization | Route Type | Transaction Amount | Settlement CurrencyBasis | Settlement Amount | Conversion Rate Type | Rate Date | Rate | From Account | To Account | Status |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| USHQ-UKCS-1 | US HQ Operations | UK Capital Services | Provider to First Clearing | 20000 USD | Transaction Currency | 20000 USD | Corporate | Feb-04-2024 | 1.0 | 01-000-18039-00-00 | 02-000-20981-00-00 | New |
| UKCS-SGOP-1 | UK Capital Services | SG Operations | First Clearing to Receiver | 20000 USD | Receiver Ledger Currency | 26800 SGD | Corporate | Feb-04-2024 | 1.34 | 02-000-18039-00-00 | 03-000-29081-00-00 | New |
The Accounting Preview will display the accounting as shown here:
| Ledger | Account | Account Description | Side | Settlement Amount | Accounted Amount | Rate Type | Rate |
|---|---|---|---|---|---|---|---|
|
US Primary Ledger
|
01-00-IC Receivable-00-00 | Intercompany Receivable | Dr | 20000 USD | 20000 USD | Corporate | 1 |
|
US Primary Ledger
|
01-000-18039-00-00 | Loan Clearing | Cr | 20000 USD | 20000 USD | Corporate | 1 |
| Ledger | Account | Account Description | Side | Settlement Amount | Accounted Amount | Rate Type | Rate |
|---|---|---|---|---|---|---|---|
|
UK Primary Ledger
|
02-00-29081-00-00
|
Loan Clearing | Dr | 20000 USD | 15800 GBP | Corporate | 0.79 |
|
UK Primary Ledger
|
02-000- IC Payable-00-00
|
Intercompany Receivable | Cr | 20000 USD | 15800 GBP | Corporate |
0.79
|
| Ledger | Account | Account Description | Side | Settlement Amount | Accounted Amount | Rate Type | Rate |
|---|---|---|---|---|---|---|---|
|
UK Primary Ledger
|
02-00-IC Receivable-00-03 | Intercompany Receivable | Dr | 26800 SGD | 15812 GBP | Corporate | 0.59 |
|
UK Primary Ledger
|
02-000-18039-00-00 | Loan Clearing | Cr | 26800 SGD | 15812 GBP | Corporate | 0.59 |
| Ledger | Account | Account Description | Side | Settlement Amount | Accounted Amount | Rate Type | Rate |
|---|---|---|---|---|---|---|---|
|
Singapore Primary Ledger
|
03-00-29081-00-00
|
Loan Clearing | Dr | 26800 SGD | 26800 SGD | Corporate | 1 |
|
Singapore Primary Ledger
|
03-000- IC Payable-00-02
|
Intercompany Receivable | Cr | 26800 SGD | 26800 SGD | Corporate |
1
|